Business Equipment and Asset Deductions

Business Equipment and Asset Deductions for 2025 and Beyond

The One Big Beautiful Bill Act (OBBBA) introduces one of the most substantial tax planning opportunities for business owners, independent contractors, and professional practices that invest in tangible property. Understanding how OBBBA’s bonus depreciation rules apply creates the ability to align capital expenditures with tax strategy and capture significant, first year deductions.

This page outlines the scope of qualifying property, the mechanics of 100% bonus depreciation, and the strategic considerations that influence tax outcomes for 2025 and future years.

Permanent Restoration of One Hundred Percent (100%) Bonus Depreciation

Effective January 19, 2025, OBBBA permanently restores 100% bonus depreciation for qualifying property. Eligible assets may be fully deducted in the year they are placed in service rather than depreciated over multiple years.

Key planning advantages include:

Reduced taxable income in the current year.
Accelerated cost recovery for essential investments.
Improved cash flow management.
Enhanced flexibility for timing large purchases.
Long-term planning consistency due to permanent treatment.
Businesses preparing for equipment upgrades, technology expansion, or software purchases can incorporate this rule into year-end planning.

Businesses preparing for equipment upgrades, technology expansion, or software purchases can incorporate this rule into year-end planning.

Qualifying Property Under OBBBA

Bonus depreciation generally applies to most business equipment and other tangible property with a recovery period of twenty years or less. Certain types of purchased computer software also qualify when they meet IRS capitalization requirements. Property must be placed in service after January 19, 2025.

Examples of eligible property include:

Machinery, manufacturing tools, and production equipment.
Technology equipment such as servers, networking hardware, switches, storage devices, and point of sale systems.
Computers, monitors, laptops, tablets, and related business hardware.
Qualifying purchased software including on-premise licensed software, capitalizable software, and eligible digital systems that are owned rather than subscribed to:
Office furnishings and fixtures.
Qualified improvement property.
Certain business-use vehicles.
Medical, dental, and professional devices or equipment.

Important clarification on software

Purchased software may qualify for bonus depreciation when it is:

Bought outright.
Owned or licensed with a capital cost.
Not part of a cloud subscription.
Not a SaaS platform with monthly or annual fees.

This distinction ensures clarity between:

Technology equipment (physical devices).
Software (capitalized intangible property).
Cloud-based services (operating expenses, not depreciable).

Strategic Importance for Business Tax Planning

The restored 100% bonus depreciation rule transforms capital expenditure planning by allowing full expensing in a single year.

This offers strong advantages for businesses experiencing:

High profitability.
Growth in operations or service capacity.
Digital modernization or automation initiatives.
Facility improvements or workspace changes.
Replacement cycles due to expansion or demand.
When applied intentionally, bonus depreciation becomes a central planning tool for managing taxable income and strengthening cash flow.

Common Technical Considerations

Interaction with Section 179

Businesses may use both Section 179 expensing and bonus depreciation. The most favorable sequence depends on taxable income, entity structure, and state conformity.

Eligibility of used property

Both new and used property may qualify if acquisition and first-use rules are satisfied.

Impact of business structure

S-Corporations, partnerships, and sole proprietors may experience different impacts due to basis limits, allocation rules, and passive activity restrictions.

Placed in service requirements

Assets must be operational and ready for business use to qualify for deduction in that tax year.

Planning Considerations Prior to Capital Investment

Businesses preparing for significant expenditures in 2025 or 2026 should review planned purchases under OBBBA guidelines to determine:

Optimal timing for placing assets in service.
Eligibility for 100% expensing.
Interaction with existing depreciation schedules.
Cash flow implications and year-end tax impact.
Opportunities to layer deductions for maximum benefit.

Many businesses qualify for greater deductions than expected. Complexity in the rules often results in missed opportunities unless analyzed through a technical tax review.

Request an OBBBA Equipment Deduction Review

A detailed review of planned equipment, technology, vehicle, facility, or software purchases will determine eligibility for bonus depreciation and favorable timing.

A review includes:

Confirmation of asset eligibility under OBBBA.
Verification of placed in service timing.
Interaction with Section 179.
Entity specific tax considerations.
Projected deduction impact on current and future years.

Submit the form below to initiate a detailed review. This analysis supports informed planning, optimized deduction timing, and stronger long term tax positioning.

The restored 100% bonus depreciation rules offer substantial first year deductions for qualifying property. A structured deduction review identifies eligibility, timing considerations, and opportunities for improved tax positioning.

This assessment supports small business owners, S-Corporation shareholders, partnerships, and independent professionals.

Provide business and asset details to evaluate eligibility for 100% bonus depreciation, projected tax impact, and optimal deduction timing under current OBBBA rules.

A concise assessment now can produce measurable savings across the year.

Request an OBBBA Equipment Deduction Review