If you ask business owners and financial managers what’s changed most in U.S. tax strategy lately, many will mention the reemergence of a powerful tool: bonus depreciation. With recent legislation, the rules around how businesses can write off large purchases are shifting again. If you’ve ever wondered whether a significant tax deduction for a new machine, software system, or even a used truck is just out of reach, the environment for 2025 may surprise you.
This article pulls apart what’s new for bonus depreciation, how it stacks up against section 179, and why your timing matters more than ever. Sometimes, the biggest wins come from understanding details others miss. Prézzo Consulting helps businesses identify these opportunities every day, mixing compliance with clarity.
The right deduction at the right time can change your cash flow story.
What is bonus depreciation and why does it matter?
According to the Tax Policy Center, bonus depreciation allows businesses to write off a significant portion—sometimes all—of an asset’s cost in the same year it’s put into use. Instead of spreading deductions over years (typically the useful life of the asset), business owners can see immediate tax relief. This isn’t just a paperwork shortcut. For many companies, it means an instant improvement in cash flow and in net income on the books.
Unlike other depreciation systems, bonus depreciation is available to almost any business (regardless of size), and there’s no annual cap on how much you can claim. The flexibility here is part of what makes it so attractive.
How section 179 expensing differs from bonus depreciation
If you’re familiar with section 179, you know it also allows a business to expense certain equipment and software costs upfront. However, there are some key differences, as emphasized by insights on the U.S. Small Business Administration blog:
- Annual limit: Section 179 has a yearly cap ($1,220,000 for 2024, with phase-out beginning at $3,050,000), while bonus depreciation does not limit the maximum deduction amount.
- Business type: Section 179 is only available for taxable income—if you don’t have a profit, no deduction. Bonus depreciation can create or increase a net loss that is carried forward.
- Asset types: Both cover many tangible assets, but bonus depreciation applies to a broader list (including qualified improvements and used property, as long as it is “new to you”).
- Flexibility: Section 179 lets you pick assets to expense. Bonus depreciation must be taken for all eligible items in a class, unless you elect out.
Reality often brings businesses with mixed needs: perhaps using section 179 up to the limit, then taking bonus depreciation for the remaining spending. This layered strategy can be powerful, especially for high-growth companies. Get more on the nuances of allowable deductions in the U.S. in this guide from Prézzo Consulting.
What changed for 2025? the OBBB and new depreciation rules
The landscape shifted in 2025 thanks to the OBBB legislation and updated IRS guidance. According to the IRS’s newsroom announcement and recent Journal of Accountancy reports, one major update is the return of 100% first-year depreciation for qualified property placed in service from 2025 through at least 2026. This is notable, as the full deduction had been set to phase out. The legislation now enables businesses to immediately deduct the full purchase price of eligible assets, both new and used, that are put into service within these years.
Studies like the National Bureau of Economic Research’s analysis suggest moves like these increase business capital investment quickly. That’s because improved cash flow encourages companies to buy and grow sooner, rather than wait out depreciation schedules. It’s a lever for proactive tax planning (see why in our international tax planning insights).
What assets are eligible for bonus depreciation?
- Machinery and equipment (manufacturing, construction, etc.)
- Computers, servers, and certain software
- Office furniture and fixtures
- Qualified improvement property (non-residential building improvements)
- Some vehicles (up to certain weight limits)
- Used property that hasn’t been used before by the taxpayer
It’s usually required that these assets have a recovery period of 20 years or less. For new or used assets acquired and put into service in 2025 or 2026, the full cost—as allowed by IRS rules—can be deducted upfront, according to the IRS.
Eligibility is about timing, not just what you buy.
How cost segregation studies unlock more deductions
Cost segregation isn’t a term everyone throws around, but it’s a hidden gem for those with significant property investments. By breaking a building down into smaller parts—electrical systems, HVAC, specialty finishes—businesses can reclassify many components as shorter-lived assets, qualifying for bonus depreciation upfront instead of over decades.
For example, a distribution company that acquires a new warehouse for $2 million can use a detailed cost segregation study to identify $600,000 in equipment, fixtures, and improvements eligible for immediate deduction—potentially shaving hundreds of thousands off their taxable income in just one year. This approach also applies to franchise owners, manufacturers, even medical clinics upgrading leased spaces.
Prézzo Consulting works with capital-intensive businesses to guide these studies and ensure accuracy, blending savings with compliance. And if you want to understand more about proper business preparation, see the tax season preparation checklist.
Impact on tax planning and choosing between strategies
Sometimes, the right choice between bonus depreciation and section 179 isn’t about what’s “better,” but about what fits your goals. Section 179 is perfect if you want to choose which assets to expense, especially when profits are strong and you want to manage taxable income. Bonus depreciation may be stronger if you have losses to carry forward, want unlimited deductions, or are making big growth investments. The two can be layered for even more impact, but it’s wise to pay attention to limits, timing, and detailed IRS guidance.
Cash flow improves, but tax loss carryforwards and state rules make the landscape complex. The practical result: consult with someone who understands your business deeply and is up-to-date on new rules. Prézzo Consulting’s advisors stress both compliance and forward-looking tax results. For a list of tax pitfalls to avoid, especially for smaller businesses, their resource on U.S. tax traps is a quick read.
Conclusion: maximize deductions, fuel growth
With the full restoration of 100% bonus depreciation starting in 2025, businesses have a window to reduce taxes and unlock cash for new investments. Whether you’re a start-up, a family business, or a larger company, matching your asset purchases and tax approach with these changes is an opportunity you shouldn’t miss. It’s not about chasing every deduction, but about making sure your actions fit your real growth story. For tailored support and strategies that keep you compliant and ahead of new rules, talk to the specialists at Prézzo Consulting today.
Frequently asked questions
What is bonus depreciation in 2025?
Bonus depreciation in 2025 refers to the tax rule allowing businesses to immediately deduct 100% of the cost of eligible new and used assets put in service during the year. This rule was restored and extended through at least 2026, after legislative changes. The aim is to provide immediate tax relief and encourage investment.
How does bonus depreciation work for businesses?
When a business acquires qualifying property and puts it into service, it can deduct the entire cost right away—no need to wait and spread the write-off over years. This accelerates bookkeeping benefits and can increase available cash, as explained by the Tax Policy Center.
Is bonus depreciation worth using in 2025?
For many businesses, yes. The ability to fully deduct major purchases can lower taxable income significantly and free up funds for growth. However, it depends on your income, state rules, and long-term plans, so it’s best discussed with a tax advisor experienced in recent legislation.
Can small businesses claim bonus depreciation?
Absolutely. Bonus depreciation is not restricted by business size or profit, unlike Section 179 which has filing limits and income considerations. Small firms can take full advantage, assuming the property qualifies. There’s no cap on the dollar amount typically, making it accessible even for modest investments.
How to maximize deductions with bonus depreciation?
To get the most benefit, ensure assets are eligible, placed in service during the current tax year, and consider a cost segregation study for property purchases. Also, coordinate with other deduction strategies like Section 179 to boost immediate write-offs. Working with specialists, such as Prézzo Consulting, can help you align these moves with broader business goals and compliance needs.
