On July 4, 2025, President Donald Trump signed the “One Big Beautiful Bill Act” into law, a sweeping piece of legislation that has quickly become a cornerstone of his second-term economic agenda. Known as the “Big Beautiful Bill” (BBB), this act reintroduces and permanently establishes 100% bonus depreciation, a powerful tax incentive designed to spur business investment and bolster American manufacturing. While the bill encompasses a wide array of tax and spending reforms, the revival of bonus depreciation stands out as a game-changer for businesses across industries. Here’s what it means for companies, from small startups to large corporations.
What Is 100% Bonus Depreciation?
Bonus depreciation allows businesses to immediately deduct a significant portion of the cost of eligible assets in the year they are placed in service, rather than spreading the deduction over several years. Initially introduced under the 2017 Tax Cuts and Jobs Act (TCJA), 100% bonus depreciation was a temporary measure set to phase out by 2027. The Big Beautiful Bill reverses this sunset, making 100% bonus depreciation a permanent fixture for qualifying assets placed in service on or after January 20, 2025.
This policy enables businesses to write off the full cost of eligible investments upfront, offering immediate tax relief and freeing up capital for further growth.
Key Assets Eligible for 100% Bonus Depreciation
The BBB outlines a broad range of assets that qualify for full expensing, including:
-Tangible personal property: This includes items such as computers, vehicles, and manufacturing equipment.
-Qualified improvement property: Interior improvements to nonresidential buildings, such as renovations or upgrades, are eligible.
-Certain production and manufacturing property: Assets used in production and manufacturing, placed in service before 2034, qualify for the deduction.
These categories make the incentive particularly valuable for capital-intensive industries like manufacturing, logistics, and construction, where large investments in equipment and facilities are common.
How Businesses Benefit
The reinstatement of 100% bonus depreciation offers several key advantages for businesses looking to invest and grow:
1. Immediate Tax Savings
By deducting the full cost of qualifying assets in the year they are placed in service, businesses can significantly reduce their taxable income. This improves cash flow, enabling companies to redirect savings toward expansion, hiring, or debt reduction.
2. Improved Project ROI
Accelerated depreciation enhances the return on investment (ROI) and internal rate of return (IRR) for capital projects. This makes previously marginal projects more financially viable, encouraging businesses to move forward with investments.
3. Competitive Edge for Domestic Investment
The BBB aims to strengthen U.S.-based manufacturing by incentivizing companies to invest domestically rather than offshore. With ongoing global supply chain challenges, this provision arrives at a critical moment, encouraging firms to bolster their operations within the United States.
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When to Avoid 100% Bonus Depreciation
While 100% bonus depreciation is a powerful tool, there are scenarios where businesses might benefit from opting out or limiting its use. Here are key situations where avoiding bonus depreciation could be advantageous:
-Anticipating Higher Future Tax Rates: If a business expects to face higher tax rates in future years—due to increased income or changes in tax policy—spreading deductions over time through regular depreciation may yield greater tax savings. By electing out of bonus depreciation, companies can preserve deductions for years when they will offset income taxed at a higher rate.
-Low Current-Year Taxable Income: Businesses with little to no taxable income in the current year may not benefit from immediate deductions, as they cannot fully utilize the tax savings. In such cases, opting for regular depreciation or Section 179 expensing (if applicable) might provide more flexibility.
-State Tax Considerations: Not all states conform to federal bonus depreciation rules. Some states may disallow or limit bonus depreciation, requiring businesses to maintain separate depreciation schedules for federal and state taxes. This can increase compliance costs and reduce the overall benefit of the deduction.
-Impact on Financial Reporting: For businesses concerned about financial statement appearances, taking large upfront deductions can reduce reported income, potentially affecting loan covenants, investor perceptions, or other financial metrics. Electing out of bonus depreciation may help smooth earnings over time.
-Loss Carryforward Limitations: Businesses with net operating losses (NOLs) may find that bonus depreciation creates or increases NOLs that cannot be used immediately due to carryforward limitations. In such cases, deferring deductions might align better with long-term tax planning.
Businesses considering opting out should consult with tax professionals to weigh the trade-offs and ensure alignment with their broader financial strategy.
Bonus depreciation isn’t always the right move. Let a KKOS tax professional help you evaluate when to take it—and when to opt out.
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Strategic Tax Planning Considerations
While 100% bonus depreciation is a generous incentive, businesses must approach it with careful planning to maximize its benefits:
-Timing Is Critical: To qualify for the deduction, assets must be placed in service—not just purchased—on or after January 20, 2025. Delays in delivery or installation could affect eligibility, so businesses should plan their capital expenditures accordingly.
-Cost Segregation Studies: For real estate owners and developers, conducting a cost segregation study can identify building components eligible for bonus depreciation, unlocking significant tax savings.
-Interaction with Other Credits: Businesses should work with tax professionals to ensure that claiming bonus depreciation does not inadvertently limit their eligibility for other tax incentives, such as the R&D tax credit or Section 179 expensing.
-Electing Out: Companies can choose to opt out of bonus depreciation on a class-by-class basis. This may be beneficial for businesses anticipating higher taxable income in future years, allowing them to spread deductions over time.
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The Broader Economic and Political Picture
The bonus depreciation provision is just one part of the sprawling Big Beautiful Bill, which also makes permanent many individual tax cuts from the 2017 TCJA, further reduces corporate tax rates, and restructures federal spending. However, the bill has sparked controversy for phasing out several clean energy tax incentives and cutting funding for social programs like Medicaid and food assistance.
Business groups have hailed the bonus depreciation provision as a catalyst for economic growth, arguing that it will drive investment and job creation. Critics, however, warn that the broader bill could add trillions to the national debt and disproportionately benefit large corporations and high-income earners.
Final Thoughts
Regardless of one’s stance on the broader political implications of the Big Beautiful Bill, the reinstatement of 100% bonus depreciation is a clear win for businesses poised to invest in their future. By allowing immediate tax write-offs for capital expenditures, this policy enhances liquidity, accelerates growth, and strengthens domestic operations.
However, the complexity of the provision and its interactions with other tax rules underscore the need for strategic planning. Businesses should revisit their capital spending plans and consult with tax professionals to ensure they fully capitalize—or strategically opt out—of this opportunity. In an uncertain economic climate, the Big Beautiful Bill’s bonus depreciation provision could be the push many companies need to shift from caution to action.
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