For most qualifying business property bought and put into use after Jan. 19, 2025, businesses can now deduct 100 percent of the cost in the first year. This means they do not have to spread the deduction over several years. This change mainly helps businesses that buy things like: Equipment and machinery.
OBBB Changes to Bonus Depreciation
The bonus depreciation rate for 2025 pre-OBBB was just 40%. The OBBB, however, permanently reinstated 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. It also provided transition provisions.
Based on the 2025 One Big Beautiful Bill Act, you can now claim 100% first-year bonus depreciation for qualified property placed in service after January 19, 2025.
100% bonus depreciation qualifies for new or used tangible business property with a MACRS recovery period of 20 years or less, including equipment, machinery, furniture, certain vehicles, off-the-shelf software, and some building improvements (like QIP), provided the property is acquired and placed in service by specific deadlines, with recent legislation (OBBBA) making it permanent for qualifying assets acquired after Jan 19, 2025, and expanding eligibility to include some used property and specific production property.
Property owners and investors should pay attention here. The OBBB — which was the Trump administration's signature tax and domestic policy bill — officially reinstated 100% bonus depreciation for property acquired after January 19, 2025, and placed in service after that same date.
Notice 2026-11 allows a taxpayer to elect under IRC Section 168(k)(5) to claim 100% bonus depreciation for specified plants that are planted, or grafted to a plant that was previously planted, after January 19, 2025, by following the provisions of Treas.
The main downsides of bonus depreciation include losing future deductions by taking them upfront, potentially increasing future taxable income, facing higher "recapture" taxes if the asset is sold, and dealing with complex rules or state-level nonconformity, making it less beneficial for short-term investors or those in lower tax brackets who might need deductions later. It also creates large upfront tax benefits that might not align with book income, affecting financing, and rules change frequently, requiring constant tax planning.
Property that doesn't qualify for bonus depreciation generally includes real estate buildings (residential/nonresidential), inventory, land, collectibles, assets with a recovery period over 20 years (like certain utilities), and property acquired from related parties or used previously by the taxpayer (for used property). Bonus depreciation targets short-lived personal property, equipment, and land improvements, not long-term structures or items not used in business.
You can't depreciate assets that don't lose their value over time – or that you're not currently making use of to produce income. These include: Land. Collectibles like art, coins, or memorabilia.
Business owners got their wish in 2025 when Congress made 100% bonus depreciation permanent. The provision, which was initially part of the 2017 Tax Cuts and Jobs Act (TCJA), began to phase out in 2023. However, the One Big Beautiful Bill Act (OBBBA) permanently reinstated the deduction for qualifying property.
Capital gains tax rates remain unchanged under the One Big Beautiful Bill Act. However, Project 2025, a policy blueprint developed by the Heritage Foundation, outlined several potential changes to capital gains taxation, including: Reducing the top long-term capital gains rate to 15%, from the current 20%
Accelerated depreciation on rental property is a strategy used to front-load depreciation expenses during the first few years of ownership. An investor may free up more cash for other uses by claiming accelerated depreciation, such as making improvements to increase rental income.
"In addition to the existing standard deduction, filers who are age 65 and older can qualify for a new senior bonus deduction of up to $6,000 for individuals and $12,000 for married couples," said Nancy LeaMond, AARP executive vice president and chief advocacy and engagement officer.
To avoid the 22% tax bracket (or any higher bracket), focus on reducing your taxable income through strategies like maxing out 401(k)s and HSAs, deferring bonuses, tax-loss harvesting, smart charitable giving, and strategic asset location, understanding that higher rates only apply to income within that bracket, not your entire income.
You can't claim depreciation on property held for personal purposes. If you use property, such as a car, for both business or investment and personal purposes, you can depreciate only the business or investment use portion. Land is never depreciable, although buildings and certain land improvements may be.
The four methods for calculating depreciation include straight-line, declining balance, units of production and sum of years digits (SYD). The best depreciation method for a company to use depends on its accounting needs, types of assets, size and industry.
In general, the OBBB provides a permanent 100‑percent additional first year depreciation deduction for qualified property acquired, or specified plants that are planted or grafted, after Jan. 19, 2025.
100% bonus depreciation qualifies for new or used tangible business property with a MACRS recovery period of 20 years or less, including equipment, machinery, furniture, certain vehicles, off-the-shelf software, and some building improvements (like QIP), provided the property is acquired and placed in service by specific deadlines, with recent legislation (OBBBA) making it permanent for qualifying assets acquired after Jan 19, 2025, and expanding eligibility to include some used property and specific production property.
The most common depreciation methods include: Straight-line. Double declining balance. Units of production.
Trump Tax Bill Bonus Depreciation Changes
Under the original TCJA, bonus depreciation was set at 100% through 2022, then scheduled to decrease by 20% each year. By 2025, businesses faced only a 40% write-off in the first year, with a complete phase-out on the horizon.