The One Big Beautiful Bill Act (OBBBA) brings important changes to bonus depreciation beginning January 19, 2025, providing expanded opportunities for businesses to immediately deduct the cost of qualifying assets. Bonus depreciation has long been a key tax incentive, allowing companies to expense a significant portion (or even 100%) of equipment, machinery, vehicles, and other qualified property in the year placed in service.

Under OBBBA, bonus depreciation is strengthened, extended, and modernized, giving businesses more flexibility in planning large capital purchases. Z Tax & Accounting explains what changes take effect on 01/19/2025, how bonus depreciation works now, and how businesses can use it to reduce tax liability.

What Is Bonus Depreciation?

Bonus depreciation allows businesses to immediately deduct a large portion of the cost of qualifying property in the year it is placed in service. Unlike Section 179, bonus depreciation:

• Has no annual deduction limit
  
  

• Can be used by businesses of any size
  
  

• Can create or increase a tax loss
  
  

• Applies automatically unless the taxpayer elects out
  
  

Bonus depreciation is especially valuable for businesses making large equipment purchases, building out facilities, or modernizing operations.

What Changes Under OBBBA on January 19, 2025?

OBBBA makes several key changes that take effect immediately for property placed in service on or after January 19, 2025. These changes include:

1. Enhanced Bonus Depreciation Rate

Beginning 01/19/2025, bonus depreciation increases from reduced phase-down percentages back toward a higher, more immediate deduction rate.
OBBBA restores bonus depreciation as a powerful investment incentive by reversing the previous year-by-year reduction.

Businesses can now deduct a significantly larger share of the cost of new or used qualified property in the year placed in service.

2. Expanded Definition of Qualified Property

OBBBA broadens the types of assets eligible for bonus depreciation, including:

• Machinery and manufacturing equipment
  
  

• Commercial vehicles
  
  

• Computers and technology hardware
  
  

• Office furniture and fixtures
  
  

• Qualified film, TV, and live production assets
  
  

• Certain improvements to nonresidential buildings
  
  

• Used property that meets the non-related-party test
  
  

This expansion encourages businesses across many industries to invest confidently.

3. Bonus Depreciation Still Applies to New and Used Property

Unlike many tax provisions, bonus depreciation continues to apply to both new and used qualifying property, provided:

• The property was not previously used by the taxpayer
  
  

• The sale was not between related parties
  
  

• The asset meets standard depreciation requirements
  
  

This rule allows smaller businesses to benefit from buying used equipment while still claiming substantial deductions.

4. No Income Limitation (Unlike Section 179)

One of the most favorable aspects of bonus depreciation — preserved by OBBBA — is that:

Bonus depreciation can create or increase a net operating loss (NOL).

This means businesses experiencing start-up years, growth years, or equipment-heavy investment periods can still fully benefit, even with low or negative taxable income.

5. Extended Availability for Future Years

OBBBA ensures that bonus depreciation remains a long-term incentive by extending its availability beyond previously scheduled dates. This gives businesses:

• Predictability
  
  

• Multi-year planning flexibility
  
  

• Confidence in making large capital investments
  
  

Z Tax & Accounting recommends incorporating this into long-range budgeting and asset acquisition plans.

How Bonus Depreciation Works Under OBBBA

To claim bonus depreciation, the property must:

• Be placed in service on or after 01/19/2025
  
  

• Have a recovery period of 20 years or less
  
  

• Be used predominantly for business
  
  

• Be acquired for business use, not personal use
  
  

• Not be acquired from a related party
  
  

When applicable, the deduction is applied after Section 179 expensing and before traditional MACRS depreciation.

Example of Bonus Depreciation Under OBBBA

A construction company buys $600,000 of equipment on February 1, 2025.

Under OBBBA bonus depreciation rules:

• The company may deduct the majority (or all, depending on the percentage) of the equipment cost immediately.
  
  

• If the deduction exceeds taxable income, it can generate a loss for the year.
  
  

• No Section 179 limit applies.
  
  

This results in significant upfront tax savings and improved cash flow.

Industries That Benefit Most

Bonus depreciation particularly benefits:

• Manufacturing & production
  
  

• Construction & contracting
  
  

• Transportation & logistics
  
  

• Technology companies
  
  

• Agriculture and fishing operations
  
  

• Medical and dental practices
  
  

• Real estate investors (select assets)
  
  

• Retailers and service businesses
  
  

Under OBBBA, nearly any business investing in equipment can benefit.

Common Mistakes to Avoid

• Assuming bonus depreciation applies only to new equipment
  
  

• Forgetting to place assets in service before year-end
  
  

• Misclassifying property with a recovery period longer than 20 years
  
  

• Overlooking used equipment opportunities
  
  

• Failing to coordinate with Section 179 deductions
  
  

• Not keeping proper records of purchase and service dates
  
  

Z Tax & Accounting ensures accuracy and maximized deductions.

How Z Tax & Accounting Helps

Our firm offers:

• Bonus depreciation eligibility analysis
  
  

• Multi-year planning under OBBBA rules
  
  

• Section 179 and bonus depreciation optimization
  
  

• Asset tracking and compliance review
  
  

• Strategic guidance on equipment purchases
  
  

• Tax forecasting and cash-flow analysis
  
  

We help businesses choose the right depreciation strategy to minimize taxes and enhance growth.

Conclusion

Bonus depreciation effective January 19, 2025 under OBBBA strengthens one of the most important tax incentives available to businesses. With enhanced rates, expanded eligibility, and long-term stability, companies have more reasons than ever to invest in equipment, vehicles, and technology.

Z Tax & Accounting is here to help you leverage these rules to your fullest advantage and make informed capital investment decisions.

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