A major tax update, the One Big Beautiful Bill Act (OBBBA), was signed into law on July 4, 2025, and it's set to significantly impact business finances. A key provision of this act is the permanent 100% bonus depreciation. This can be a game-changer for businesses planning to invest in new equipment, vehicles, or improvements.
What Has Changed?
The bonus depreciation rule now allows businesses to deduct 100% of the cost of qualifying assets placed in service starting January 20, 2025. Previously, the phase-down schedule was at 40% for 2025, but now it's permanent.
Qualifying Assets
Eligible assets include equipment, machinery with a useful life of 20 years or less, qualified improvement property, computer software, and certain business vehicles, considering weight and use constraints.
Why It Matters
- Businesses can deduct the full cost of eligible assets—like computers, furniture, or building improvements—in the year they're placed in service.
- Taking full depreciation upfront reduces taxes in the year of purchase and increases available working capital.
- Accelerated deductions can improve cash flow, freeing up funds for areas like staffing, system upgrades, or expansions.
- Businesses have more flexibility to time purchases based on operational needs and tax strategy.
Considerations
Not all states may conform to this federal provision, so it's crucial to check local tax rules. Consulting a tax professional can provide clarity on leveraging this law effectively.
Use Cases
Think about buying a fleet of vehicles or upgrading software systems. Bonus depreciation allows businesses to make these investments more strategically.
The OBBBA offers an exciting opportunity for upfront tax savings and strategic planning. If investments were already on your horizon, this might be the move for your business growth. Evaluate upcoming purchases and consult a tax advisor to explore how bonus depreciation could benefit your specific situation.
