Bonus Depreciation 2025 for Business Owners
If something did go sideways tomorrow, how prepared would your business be to respond?
Having a plan in place for the unexpected is one of the best ways to protect your business—and that kind of proactive planning extends beyond crisis response. It’s just as critical when it comes to tax strategy.
With the passage of the One Big Beautiful Bill Act (OBBBA), now is the time to make strategic decisions around capital investments, hiring, and R&D. The actions businesses take in the second half of 2025 will directly impact their tax position heading into 2026.
Here’s a quick overview of key OBBBA provisions affecting small businesses:
- Permanent extension of the Qualified Business Income (QBI) deduction – that 20% write-off remains in place for pass-through entities.
- Permanent 100% Bonus Depreciation – today’s focus.
- Permanent expensing of domestic research and experimental (R&E) costs – reversing the TCJA’s capitalization requirement.
- No tax on tips or overtime – payroll systems may need an update.
- Elimination of several clean energy credits – including solar and EV incentives for business use.
- Expanded employer tax credits – including a higher employer-provided child care credit and a permanent credit for paid family and medical leave.
This week, we’re taking a closer look at the return of 100% bonus depreciation—and how it can help businesses maximize deductions on qualifying assets.
Bonus Depreciation 2025 for Business Owners
“If a window of opportunity appears, don’t pull down the shade.” —Tom Peters
Bonus Depreciation 2025: Quick Answers
- 100 percent Bonus depreciation is now permanent under the One Big Beautiful Bill Act (OBBBA).
- Assets must be placed in service after January 19, 2025, with contracts signed on or after that date.
- Used equipment still qualifies if it wasn’t previously used in your business or bought from a related party.
- For buildings and improvements, consider a cost segregation study to carve out shorter-life assets and fully expense them this year.
____________________________________________________________
Let me start off with a hypothetical: Let’s say, earlier this year, you bought a new POS system for 95K and rolled out 50K in leasehold improvements to accommodate it.
If you signed the contract and installed it after January 19th? You can deduct the full 145K in year one. And if you’re in the top tax bracket, that could mean 50K+ in immediate tax savings.
How?
The One Big Beautiful Bill Act (OBBBA).
And it means more opportunities for you to invest in the things that grow your business. The key is understanding what qualifies and how to structure your purchases to maximize the benefit. Let me explain…
Bonus Depreciation 2025: How it Works
The One Big Beautiful Bill Act (OBBBA) permanently reinstated 100 percent bonus depreciation for qualified property placed in service on or after January 19, 2025. But only if the binding contract to acquire the asset was also signed on or after that date.
And that “contract date” distinction could mean the difference between writing off 40 percent of an asset’s cost… or 100 percent of it in the current year.
(However: States may not conform fully to OBBBA, so make sure to review your state’s tax treatment.)
Let’s go back to our POS system example. If you placed it in service back in early January (before January 19th), and you had already signed the deal in December, then you’re only allowed 40 percent bonus depreciation, coming out to 58K in deductions.
But if you signed the contract after January 19 and installed it after that, too, you’re eligible to deduct the full 100 percent (145K) in year one.
Bonus Depreciation 2025: What Qualifies?
You can fully expense almost anything with a Modified Accelerated Cost Recovery System (MACRS) recovery period of 20 years or less, including:
- Machinery and manufacturing equipment
- Office furniture, fixtures, and computers
- Technology infrastructure (owned, not leased SaaS)
- Vehicles (over 6 thousand lbs.)
- Interior renovations in nonresidential buildings
- 15-year assets like parking lots, paving, lighting, and landscaping
And yes, used assets still qualify, as long as:
- You didn’t use it before for your business
- You bought it from an unrelated seller
- It hasn’t already been depreciated in your business
And if you’re still unsure? We can help you categorize your assets correctly and plan for purchases coming down the pipe.
What if I Bought an Asset Before January 19, 2025?
If you signed the contract or placed an asset in service before January 19, you’ll fall under the old rules. Which means you can likely deduct only 40 percent of the cost up front. But there are still options to boost your deduction:
- Do a cost segregation study: You might move parts of the purchase into shorter-life buckets (5-, 7-, or 15-year) and still get favorable treatment. For example: if it’s a building or renovation, we can break out parts of it (like lighting, HVAC, flooring) that may qualify for full 100 percent depreciation even if the overall project doesn’t.
- Use Section 179 expensing instead: For smaller purchases, or if you’re in a state that doesn’t follow federal bonus rules, Section 179 might let you write off the full amount anyway.
Bonus Depreciation 2025: What You Should Be Doing Right Now
If you’re eyeing any significant purchases this fall (or even in Q4), here’s your tax-smart checklist:
- Get a cost segregation study for buildings, renovations, or tenant improvements.
- Talk to your CPA (hi, that’s me) before you buy, not after the deal closes.
- Review your depreciation methods. Consider Form 3115 if you need to make a change or catch up on prior-year depreciation.
- Run cash flow projections with bonus depreciation in mind. Those deductions affect quarterly tax estimates and might free up capital you didn’t think you had.
FAQ
“I’m doing a full renovation of my office this fall. Does any of that qualify for bonus depreciation?”
Absolutely. Especially if the work includes interior buildouts in a nonresidential building. That falls under Qualified Improvement Property (QIP), which is depreciable over 15 years and fully eligible for 100 percent bonus.
Examples include:
- Non-structural walls
- Lighting
- Flooring
- Ceilings
- HVAC systems
(And if you’re not sure what’s QIP and what isn’t, we’ll review your contractor estimates.)
“I bought a building a few years ago. Can I still get bonus depreciation for parts of it now?”
Yes. You’ll need to do a cost segregation study to find out which components qualify for retroactive 100 percent bonus depreciation under the new OBBBA rules. Then you’d file Form 3115 to make an automatic accounting method change and catch up all that missed depreciation in your current tax year (a process we’re glad to assist with).
“Should I use Section 179 or bonus depreciation for my new purchases this year?”
In many cases, you can (and should) use both. We’ll help you model both options to see which mix gives you the best cash flow and tax positioning.
“Does this apply to vehicles too?”
Yes, but with some caveats. Heavy SUVs, pickups, or work vans generally qualify for full bonus depreciation. But if it’s under 6 thousand lbs, the luxury auto limits kick in and cap the amount you can deduct.
“How does this affect my quarterly estimated taxes and cash flow?”
A large bonus depreciation deduction can dramatically reduce your tax liability for the year, sometimes even creating a net operating loss (NOL). That affects your estimated payments and your cash reserves (and may even open up refund opportunities).
We’ll use your asset schedule to run projections, update your tax plan mid-year, and make sure your estimated payments stay aligned with your real liability.
How I can help…
If you’re planning to make equipment purchases, upgrades, or property improvements this year, the tax landscape is as favorable as it’s been in a long time. So, let’s chat about it. My team and I can help you plan your upcoming purchases, review your past classifications, and build a depreciation strategy that aligns with your goals:
calendly.com/eco-tax-free-consultation/meeting
