New Bonus Depreciation Rules for 2025

Bonus Depreciation
Big news for business owners: your 2025 purchases could be fully deductible thanks to the One Big Beautiful Bill!
December 2025

Bonus depreciation allows businesses to immediately deduct the cost of qualifying purchases, instead of depreciating them over many years. Under the 2017 Tax Cuts and Jobs Act (TCJA), businesses could deduct 100% of the cost of new equipment, vehicles, software, etc., through 2022. That 100% write-off was set to phase down (80% in 2023, 60% in 2024, 40% in 2025). In other words, a machine bought in 2024 would only get 60% of its cost deducted immediately.

However, a new law – often referred to as the “One Big Beautiful Bill” (officially the One Big Beautiful Bill Act, signed July 4, 2025) – repeals that phase-out. Now, any qualifying asset acquired and placed in service after January 19, 2025 can immediately deduct 100% of the cost. Assets acquired before January 20, 2025 will follow the old schedule – only 40% bonus in 2025 – so the acquisition date matters.

What Counts as “Qualifying Property”?

Not everything is eligible. Generally, qualifying property is physical property with a recovery period of 20 years or less. Examples include:

  • Equipment, machinery and tools of the trade (manufacturing machines, tools, restaurant kitchen equipment, shop equipment).
  • Vehicles (business cars, trucks, vans or trailers usually count, subject to the usual vehicle limits).
  • Office assets. Computers, printers, office furniture, fixtures and similar items.
  • Business software. Off-the-shelf computer software.
  • Qualified Improvement Property (QIP). These are non-structural interior improvements to a building after the building is originally placed in service (for example, retail store remodel, office build-out).
  • Other items can include water utilities, certain types of manufacturing and film/TV productions also qualify.

Business Impact

These changes can have an impact on a small or mid-size business’s tax bill. Here are some simple examples:

  • Bakery equipment: A bakery buys a new oven and mixer for a total of $20,000 in spring 2025. Under the old phase-down, they would only deduct 40% of bonus depreciation ($8,000) in 2025, spreading the rest over future years. Under the new rule, they can deduct the full $20,000 in 2025. If the bakery’s tax rate is 25%, that means $3,000 tax is saved right away ($20,000 × 25% = $5,000 tax saved vs $8,000 × 25% = $2,000 under the old rule). That extra cash can be reinvested in the business now.
  • Delivery truck: A landscaping business buys a $30,000 pickup truck for work in February 2025. With 100% bonus depreciation, the entire $30,000 cost can be written off in 2025. Under the old 40% rule, only $12,000 could be deducted in 2025. At a 25% tax rate, the additional $18,000 deduction (now possible) means a $4,500 tax savings this year.
  • Building improvements: Even non-equipment purchases can qualify. For example, if a retailer spends $50,000 renovating a store interior (new lighting, fixtures, etc.), these costs may be “qualified improvement property”. Normally that would be written off over 15 years. Now the retailer can take that $50,000 as a 2025 deduction.

These examples show how the increase in bonus depreciation rate (from 40% to 100%) reduces taxable income immediately. The One Big Beautiful Bill Act is designed to encourage investment by allowing businesses to front-load these depreciation deductions.

Next Steps: What You Should Do

These rules can be a real benefit, but the details matter. For example, to get the full 100% depreciation deduction you must have acquired and placed the asset in service after January 19, 2025. If you signed a purchase contract in 2024 and put the asset into use in 2025, the “acquisition date” might be 2024, limiting you to 40% bonus. Also remember that you can elect out of 100% bonus depreciation (or elect only 40%) if that makes sense for tax planning.

Because every business is different, it’s wise to consult your accountant. We can help you figure out:

  • Which purchases qualify for 100% bonus depreciation under the new law.
  • How to time your capital spending.
  • Whether to combine bonus depreciation with the (higher) Section 179 limit or other deductions.
  • Any unexpected impacts (for example on state taxes or other tax credits).

Talk to your accountant. We’re here to help you understand and make the most of the new bonus depreciation rules and apply them to your business to help you reach your goals.