Bonus Depreciation is Back: What Business Owners Need to Know

The new One Big Beautiful Bill has been signed into law, and if your business purchases equipment, technology, or other assets, the return of 100% bonus depreciation is a provision worth paying attention to.

Let’s break down what bonus depreciation means, what’s changed, and how businesses can prepare for the new rules taking effect in 2025.

What is Bonus Depreciation?

Bonus depreciation allows businesses to write off the full cost of eligible assets in the year they’re purchased, rather than spreading that deduction over several years.

Let’s say you buy $100,000 worth of equipment. Instead of deducting $20,000 per year for five years, bonus depreciation lets you deduct the full $100,000 upfront.

This kind of immediate expense recognition can improve your tax position in the year of purchase and help free up cash flow. This is especially helpful in capital-intensive industries.

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What's Changing Under the New Law?

Since the 2017 tax reform, bonus depreciation had been set at 100%, but it started phasing out in recent years, dropping to 80%, then 60%, and was slated to fall further. Under the new bill, however, bonus depreciation is back to 100% starting in 2025.

To qualify, the asset must be purchased after January 19, 2025. Most types of tangible personal property used in business (such as machinery, computers, and furniture) are eligible. Long-lived assets like real estate generally are not.

But there’s a big exception: New manufacturing facilities will now qualify for 100% bonus depreciation, including the full building cost. That’s a notable change aimed at supporting domestic production and factory development.

What About Assets Purchased Before 2025?

If your business bought assets before January 19, 2025, the prior phase-out schedule still applies. That means you might only be eligible to deduct a portion of the cost in year one.

There are still options, though (like Section 179 expensing), which also provides immediate deductions but comes with its own set of limitations and eligibility rules.

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Planning Considerations

Every state handles depreciation a little differently. Some, like Wisconsin, follow Section 179 but not bonus depreciation. That’s where tax planning can make a difference.

Deciding whether to use bonus depreciation or Section 179 may depend on your state, your revenue, and your goals for minimizing taxable income.

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The Bottom Line

If you’re thinking about upgrading equipment or investing in new assets, 2025 could be a good year to act. The return of full bonus depreciation gives businesses more flexibility in managing tax obligations and improving financial performance, especially when those decisions are timed right.