Under the One Big Beautiful Bill Act (OBBBA) of 2025, 100% bonus depreciation is available for qualified, tangible business assets with a recovery period of 20 years or less placed in service after January 19, 2025. Eligible property includes machinery, equipment, computers, furniture, vehicles, and qualified improvement property (QIP), provided it is new or used (if not previously used by the taxpayer) and used for business.
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.
One Big Beautiful Bill Act
In 2025, the OBBB reinstated 100% bonus depreciation. Starting with property placed in service after Jan. 19, 2025, businesses can again deduct 100% of the cost of most qualifying property up front moving forward.
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.
Vehicles qualifying for 100% bonus depreciation are primarily heavy-duty trucks, large vans, and SUVs with a Gross Vehicle Weight Rating (GVWR) over 6,000 pounds that are used more than 50% for business, with the full 100% deduction applying to assets placed in service after January 19, 2025, under the OBBB Act, allowing for immediate expensing of the entire cost, unlike luxury cars capped by IRS rules.
Cars that qualify for 100% capital allowances (First-Year Allowance) are brand new, fully electric cars with zero CO2 emissions (0 g/km), allowing businesses to deduct the entire cost from taxable profits in the year of purchase, provided they meet environmental and usage conditions and aren't second-hand. This significant tax relief applies to new, unused zero-emission vehicles, including certain electric vehicles and even some traditional black cabs, but not hybrids or used EVs.
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.
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.
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.
Both new and used property can qualify if the asset is new to you and used in your business during that tax year. Let's say your business buys $1 million worth of equipment. With 100 percent bonus depreciation, you can deduct the full amount in year one.
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.
The One Big Beautiful Bill Act (OBBA) restored 100% bonus depreciation in 2025, letting Airbnb hosts and short-term rental owners fully deduct qualifying asset costs. Properties that qualify as businesses may use the short-term rental tax loophole to apply bonus depreciation beyond rental income.
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.
Written prior to the explosion of the Sport Utility Vehicle (SUV) market, this tax break defines qualifying vehicles by their weight instead of function.
Bonus depreciation was scheduled to end in 2027. The One Big Beautiful Bill Act (OBBBA) permanently increased bonus depreciation to 100 percent of basis for qualified property acquired after January 19, 2025.
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.
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.
Disadvantages of Car Allowances
Car allowances do not ensure coverage of all vehicle-related expenses. Employees bear responsibility for insurance, maintenance, depreciation, and other costs. Because the IRS treats most car allowances as taxable income, the take-home amount may fall short of actual expenses.
First year allowances
100% of the cost of qualifying 'main pool' plant and machinery (such as office furniture, computer equipment, company commercial vehicles etc) but not cars (known as 'full expensing'), and.
You can claim a maximum of 5,000 work-related kilometres per car. You need to keep records that show how you work out your work-related kilometres.