Tax Alert: 100% Bonus Returns - A Game-Changer

The restoration of 100% bonus depreciation represents one of the most significant business tax developments in years. Here's what every business owner needs to know.

The Return of Full Expensing

After declining to 80% in 2023 and 60% in 2024, bonus depreciation is back to 100% under the One Big Beautiful Bill Act. This applies to qualifying property placed in service in 2025 and going forward, with the provision now permanent rather than scheduled to phase out.

Immediate Impact

A business purchasing $500,000 in qualifying equipment can now deduct the full amount in year one, rather than spreading deductions over 5-7 years. At a 30% combined tax rate, that's $150,000 in immediate tax savings versus approximately $21,000-$30,000 under normal depreciation.

What Qualifies

Most tangible business property with a recovery period of 20 years or less qualifies, including manufacturing equipment, computers, furniture, certain vehicles, and qualified improvement property. Both new and used property qualify, provided you haven't previously used the asset.

Planning Opportunities

Timing Flexibility: With permanent 100% bonus depreciation, you no longer need to rush year-end purchases. Plan acquisitions based on business needs, not tax deadlines.

Cash Flow Management: Coordinate equipment purchases with projected income to maximize tax benefit in high-income years.

Leasehold Improvements: Qualified improvement property (interior improvements) now qualifies for bonus depreciation, making tenant build-outs significantly more attractive.

Consult Your CPA

While full expensing is generally beneficial, some situations favor spreading deductions over time. Your CPA can model the optimal approach based on your specific income projections and business circumstances.