One of the most impactful provisions of the One, Big, Beautiful Bill Act for capital-intensive businesses is the restoration of 100% bonus depreciation. If you have been deferring equipment purchases or delaying capital investments because the depreciation benefit was shrinking year by year, the calculation has changed. Here is how to take full advantage.

What Changed

The Tax Cuts and Jobs Act of 2017 introduced 100% first-year bonus depreciation, but it was always scheduled to phase down. By 2025, the rate had dropped to 40% under the original schedule. The OBBBA permanently restored the rate to 100% for qualifying property placed in service after January 20, 2025. This is not a temporary fix. The 100% rate is now the baseline going forward.

What Qualifies

Bonus depreciation applies to tangible personal property with a recovery period of 20 years or less. This includes machinery, equipment, computers, office furniture, certain vehicles, and qualified improvement property (interior improvements to nonresidential buildings). Both new and used property qualify, as long as the property is new to your business.

There are limits for passenger automobiles. The first-year depreciation cap for vehicles placed in service in 2025 is $20,400 (with bonus depreciation). Heavier vehicles over 6,000 pounds gross vehicle weight are not subject to this cap, which is why many business owners favor SUVs and trucks that exceed the threshold.

Bonus Depreciation vs. Section 179

You have two powerful tools for first-year expensing, and they work differently. Section 179 lets you choose which specific assets to expense up to $2,500,000, but the deduction cannot create or increase a net operating loss. Bonus depreciation applies to all eligible assets in a class and can create a loss.

The strategy depends on your situation. If you want to control exactly which assets to expense and avoid creating a loss, use Section 179. If you want to maximize deductions and are comfortable carrying a loss forward, bonus depreciation is more aggressive. In many cases, the optimal approach uses both: Section 179 on selected assets and bonus depreciation on the remainder.

Planning Considerations

Timing matters. The placed-in-service date determines eligibility, not the purchase date. An asset ordered in December 2024 but delivered and operational in February 2025 qualifies for the 100% rate. Conversely, an asset purchased in 2025 that is not operational until 2026 uses 2026 rules (which are also 100%, so the distinction is moot going forward).

If you are planning significant capital expenditures this year, consult your tax advisor about the interaction between bonus depreciation, Section 179, and your overall tax position. The restored 100% rate is a powerful tool, but it works best as part of a deliberate strategy.