Under the One Big Beautiful Bill Act (OBBBA), 100% bonus depreciation is reinstated for most new and used tangible property with a recovery period of 20 years or less, acquired and placed in service after January 19, 2025. Key assets include machinery, equipment, computers, certain vehicles, and qualified improvement property.
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.
Among the many provisions introduced in the One Big Beautiful Bill Act, the return of 100% bonus depreciation stands out as one of the most highly anticipated by taxpayers and tax professionals alike, and for good reason. 100% bonus depreciation is now permanently enacted as of January 20, 2025.
100% bonus depreciation qualifies for tangible business assets with a Modified Accelerated Cost Recovery System (MACRS) recovery period of 20 years or less, including machinery, equipment, furniture, vehicles, software, and qualified real property improvements, provided the original use starts with the taxpayer and it's acquired and placed in service after January 19, 2025, under the new One Big Beautiful Bill Act (OBBB). Specific rules also apply to used property and qualified production property, allowing immediate write-offs for many capital investments.
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.
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.
100% bonus depreciation, when placed in service between 9/28/2017 and 12/31/2022. 80%, when placed in service between 1/1/2023 and 12/31/2023. 60%, when placed in service between 1/1/2024 and 12/31/2024. 40%, when placed in service between 1/1/2025 and 12/31/2025.
Bonus depreciation has no annual limit on the deduction. Section 179 deductions are also limited to annual taxable business income, meaning that a business cannot deduct more money than it made. Bonus depreciation does not have this limit and can be used to create a net loss.
You can't entirely avoid taxes on a bonus, but you can significantly lower the amount by contributing to tax-advantaged accounts (401(k), IRA, HSA), deferring the bonus to a year you expect to be in a lower tax bracket, or making charitable donations, thereby reducing your taxable income or increasing deductions at tax time.
If the individual tax cuts expire, taxpayers in all income groups would face higher and more complicated taxes. Machinery and equipment expensing is a key provision that, if allowed to expire, would especially harm capital-intensive industries like manufacturing.
Depending on the size of your bonus and how much you've already contributed to your retirement account for a particular year, you may be able to either put some or all of your bonus in a tax-deferred retirement account.
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.
Another common option for helping with current tax liabilities is to contribute to a tax-advantaged account, such as a 401(k), traditional IRA, or Health Savings Account (HSA). If you have one of these accounts, consider using a portion of your bonus to make a qualifying contribution.
Only vehicles with a GVWR over 6,000 lbs qualify for 100% bonus depreciation without luxury auto limits.
If the vehicle weighs more than 6,000 pounds and is used more than 50% for business, you can write off up to $28,900 in the first year, and potentially even more with bonus depreciation. Let's break it down: Buy a qualifying vehicle for $60,000, and you could write off a large portion of that cost in year one.
The recent tax law reinstates full bonus depreciation—meaning qualifying property placed in service on or after January 20, 2025 can often be expensed immediately rather than spread across a depreciation schedule.
The key to eligibility for OBBB 100% bonus depreciation is that the assets are both acquired and placed in service after Jan. 19, 2025. The acquisition requirement is particularly important for situations where the property was previously purchased but not yet installed.
Yes, 100% bonus depreciation is back for eligible property acquired and placed in service after January 19, 2025, thanks to the "One, Big, Beautiful Bill" (OBBB) Act, which permanently reinstated it, reversing the phase-out schedule that would have reduced it to 40% for 2025 under prior law. This allows businesses to deduct the full cost of new equipment, machinery, and other qualified assets in the first year, significantly impacting tax planning.