After months of political back-and-forth, Congress passed—and the president signed—a sweeping tax bill on July 4, 2025, that brings back a popular incentive for business owners: 100% bonus depreciation. Starting with assets placed in service on or after January 20, 2025, companies can once again deduct the full cost of qualifying purchases like equipment, technology, and machinery in the same year they’re used.
For owners managing tighter margins, higher prices, and shifting demand, this is more than a tax perk. It’s a chance to reduce this year’s tax burden and redirect those savings into operations—whether that means upgrading a production line, modernizing office infrastructure, or finally replacing a delivery vehicle on its last leg.
A Tax Incentive Returns at Full Strength
The 2025 bill reverses a phase-down and restores immediate expensing
Under the Tax Cuts and Jobs Act of 2017, businesses were initially allowed to deduct 100% of the cost of qualifying assets in the year they were placed in service. However, that provision began phasing out in 2023, decreasing to 40% by 2025.
The new legislation halts the phase-out and resets bonus depreciation to 100%, effective for assets placed in service on or after January 20, 2025. That includes tangible personal property, such as machines, computers, and vehicles, as well as certain improvements to non-residential buildings.
Unlike Section 179 expensing, bonus depreciation isn't subject to income limits or caps, which makes it especially valuable for larger capital expenditures or high-income years.
According to a July 9 analysis in CPA Practice Advisor, this reversal may be one of the most impactful small-business provisions in the entire package.² For companies looking to improve cash flow or front-load deductions during growth years, it's a planning window worth capitalizing on.
Timing is Everything
Bonus depreciation isn’t based on when you sign the contract or make a down payment—it hinges on when the asset is placed in service, meaning when it's installed, functional, and being used in your business.
As tax advisory firm KBKG notes, if you buy equipment in November but don’t start using it until January, you miss the 2025 deduction. That’s a detail that can cost thousands of dollars. Here's what to keep in mind:
- Technology purchases must be delivered, set up, and in operational use by December 31, 2025.
- Leasehold improvements, such as HVAC, lighting, or interior remodels, must be completed and utilized in your business by year-end.
- Vehicles and heavy machinery must meet IRS definitions for qualified property and not exceed cost thresholds for luxury limitations.
If these benchmarks aren’t met, the deduction gets delayed, and in some cases, reduced under standard MACRS depreciation schedules. For businesses with tight cash flow or major capex plans, that could mean missing a rare opportunity to lower taxable income now.
The Deadline That Counts
One of the more technical, yet crucial, factors related to bonus depreciation is when the asset is placed in service. It’s not enough to simply sign a contract or pay a deposit; the asset must be operational for its intended use before year-end to qualify for the 2025 deduction.
As tax advisory firm KBKG explains, “If equipment is purchased but not delivered and in use until early 2026, it won’t qualify for 2025’s 100% bonus, even if paid in full.”
This distinction makes planning and documentation essential. Business owners should review lead times, installation requirements, and service-in-place milestones for any major purchases. For example:
- Computers or office tech ordered in Q3 must be installed and activated before Dec. 31.
- Leasehold improvements must be completed and used in active business operations.
- Large machinery or vehicles must meet the definition of qualified property and not exceed annual limits.
Missing these windows could reduce the deduction to regular MACRS depreciation, delaying tax benefits for years.
Small Businesses Can Benefit Too
You don’t need a massive manufacturing facility to benefit from bonus depreciation. Many smaller companies—especially LLCs, sole proprietors, and professional service firms—can leverage this incentive for:
- Computer systems, software, and servers
- Office equipment or furniture
- Medical and dental tools
- Commercial vehicles
- Renovations to leased space
Even solo entrepreneurs and Schedule C filers may qualify, provided the assets are used in an active trade or business.
For real estate investors and owners, there’s an additional layer of opportunity: cost segregation. According to a July 2025 update from CSSI Services, certain components of commercial properties, such as electrical systems, interior fixtures, and even flooring, can be broken out for accelerated depreciation under the new bonus depreciation rules.⁴
This is especially useful for owners planning tenant improvements, adaptive reuse, or hybrid workspace redesigns. It’s not just about writing off one piece of equipment—it’s about restructuring your depreciation profile to improve return on investment.
What to Do Now to Maximize the Benefit
To take full advantage of the reinstated 100% bonus depreciation, here’s what to do before year-end:
- Evaluate your 2025 capital plan. If you’re considering asset purchases, talk with your CPA now. There’s a narrow window to buy, install, and put those assets to use by December 31.
- Keep documentation airtight. Track not just purchase dates, but when assets are delivered, installed, and ready for use. The IRS doesn’t guess—neither should you.
- Run income scenario modeling. Bonus depreciation creates large deductions. Ensure that this strategy aligns with projected income, entity structure, and potential carryovers.
- Consider a cost-segmentation study. Especially for building improvements, a study could unlock depreciation on components that would otherwise be written off over decades.
- Reassess entity-level tax flow. Whether you’re a pass-through or C-corp, how and when deductions hit your return matters. Coordinate with your CPA to structure around NOLs, basis limits, or future rate changes.
This isn’t a provision to use in hindsight. It’s one that rewards forward-looking, detail-oriented execution.
Conclusion
The return of 100% bonus depreciation gives business owners a timely opportunity to invest in growth while reducing their 2025 tax bill. But like most high-impact tax incentives, the benefit is tied to those who plan early, execute clearly, and document thoroughly.
Whether you’re expanding operations, upgrading infrastructure, or preparing for a future sale, this restored deduction offers more than a write-off; it offers strategic financial control. And in a year where margins matter, that control is hard to overstate.
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