100% Bonus Depreciation is Back

Bonus depreciation allows businesses to take a significant portion of the purchase price as a tax deduction in the year of purchase. This tax deduction was 100% for many years before 2023, 80% in 2023, 60% in 2024, 40% in 2025, and it was supposed to end by 2027.

The One Big Beautiful Bill Act (OBBBA) has permanently brought back 100% bonus depreciation for qualified assets that are placed in service after January 19, 2025. This means that businesses will be able to deduct 100% of the purchase price of qualified assets in the year they buy them if they are purchased after January 19, 2025.

Assets that qualify for bonus depreciation are assets that have a useful life of twenty years or less for tax purposes. Some examples of the types of property that would qualify for this tax break are machinery, equipment, computers & related equipment, furniture, certain vehicles, and certain land improvements. These assets can be new or used, as long as they weren’t used by the same business before.

This could be a significant federal income tax benefit for some businesses. However, many states don’t follow the federal rules for bonus depreciation. As a result, businesses might get less tax benefit from the state compared to the federal government in the first year.

If you are planning to buy business assets in 2025 or the future, it’s a good idea to check with your Boyum adviser to see if the asset qualifies for bonus depreciation or another tax break.