Use the OBBBA Depreciation enhancements as a Year-end Planning Strategy: Write Off Equipment & other assets at 100% 

Business owners, get ready: 100% bonus depreciation is back and stronger than ever, joined by a groundbreaking new deduction for manufacturing facilities (more on this provision later). But before you start writing off every new truck and computer, there are important details to remember. 

The Basics 

The OBBBA made three major moves on depreciation. This article will address two of those provisions: 

100 percent bonus depreciation is back, and permanent. For property acquired and placed in service on or after January 20, 2025, you can deduct the full cost in the first year. Previously, bonus depreciation had dropped to 60 percent in 2024 and fell to 40 percent for the first three weeks of 2025. Now it’s permanent at 100 percent! 

The Section 179 deduction jumped to $2.5 million for 2025, up from $1,220,000 in 2024. The phase-out starts at $4 million for property placed in service and disappears entirely at $6.5 million. These amounts will be adjusted for inflation in future years. 

Together, these provisions can deliver massive upfront tax savings for businesses investing in growth.  

What Qualifies for 100 Percent Bonus Depreciation? 

Bonus depreciation lets you deduct the full cost of property in the year you place it in service. Here’s what qualifies: 

• Tangible personal property with a depreciation period of 20 years or less: machinery, computers, furniture, vehicles (see below vehicle rules), tools 

• Off-the-shelf software (but not custom software) 

• Land improvements with a 15-year depreciation period: landscaping, fences, driveways, parking lots 

• Qualified improvement property: non-structural interior improvements to commercial buildings made after they’re placed in service 

What doesn’t qualify: 

• Land 

• Buildings and permanent structures (unless they’re qualified production property) 

• Inventory 

• Intangible property like patents, copyrights, and trademarks 

• Property outside the United States 

The Vehicle Rules (Read This Carefully) 

Vehicles have special rules that trip up a lot of business owners. 

For passenger automobiles (GVWR 6000lbs or less), bonus depreciation is capped: 

• You must use the vehicle at least 51 percent for business 

• Bonus depreciation is limited to $8,000 annually 

• Total first-year deduction (including regular depreciation) maxes out at $20,200 for 2025 

• The OBBBA didn’t increase these limits 

For vehicles with GVWR over 6,000lbs: 

• No annual deduction limit 

• Use it 100 percent for business? Deduct 100 percent of the cost in year one 

This is why heavy-duty SUVs and trucks dominate business fleets. A $90,000 luxury SUV over 6,000 pounds gets a full first-year write-off. A $90,000 sports car gets capped at $20,200. 

Bonus Depreciation: The Pros and Cons 

Advantages: 

• No dollar cap. Buy $10 million in equipment? Deduct $10 million (assuming 100 percent business use). 

• Can create losses. Unlike Section 179, bonus depreciation can generate or increase net operating losses you carry forward. 

• Automatic. You don’t pick and choose. This deduction applies to all qualifying property unless you elect out. 

Watch out for: 

• All-or-nothing by asset class. If you use bonus depreciation, you must use it for all assets within the same class. Buy a car and take bonus depreciation? You must take it for any other five-year property you buy that year, including computers, office equipment, etc. You can’t cherry-pick. 

• Business-use requirement. You need 100 percent business use for a full deduction. Mixed-use property gets a proportional deduction. 

Section 179: Still Useful, But Less So 

Section 179 lets you write off up to $2.5 million in property for 2025, but it has stricter rules than bonus depreciation: 

What Section 179 offers: 

• Selective deductions. Unlike bonus depreciation, you pick which assets to deduct. This is helpful for managing taxable income strategically. 

• Can partially expense assets. Deduct part of the cost now, depreciate the rest over time. 

• Covers some extras. Section 179 includes certain exterior improvements to commercial buildings (roofs, HVAC systems) that bonus depreciation doesn’t. 

Where Section 179 falls short: 

• Cannot create a loss. Your deduction is capped at taxable business income for the year. Unused amounts carry forward. 

• Annual caps. The $2.5 million limit constrains larger businesses; bonus depreciation has no ceiling. 

• Recapture risk. If business use drops to 50 percent or below, you must give back the deduction. No such recapture with bonus depreciation (except for listed property). 

Most tax professionals will default to bonus depreciation and use Section 179 only when they need selective control. 

ALERT FOR Real Estate Investors: Cost Segregation Just Got Supercharged 

Here’s another benefit for real estate investors: 100 percent bonus depreciation turbocharges cost segregation for commercial and residential rental property owners. 

Cost segregation lets you separate personal property and land improvements from the building itself. Commercial buildings normally depreciate over 39 years; residential rentals over 27.5 years. But personal property depreciates over 5-15 years. 

With 100 percent bonus depreciation, you can now deduct the full cost of personal property and land improvements in year one. 

In general, about 20 percent of a property’s value (excluding land) consists of personal property and land improvements. Cost segregation plus 100 percent bonus depreciation can deliver massive first-year write-offs. 

Planning tip: If you need an engineering firm to perform a cost segregation study, book them early. 

Common Myths and Mistakes 

Myth #1: “I can write off my new office building immediately.” 

Reality: Buildings don’t qualify for bonus depreciation unless they’re qualified production property used in manufacturing. Land improvements like parking lots and landscaping qualify. However, the structure itself doesn’t, unless you use cost segregation to separate personal property and land improvements. 

Myth #2: “I can deduct my $80,000 luxury SUV in full.” 

Reality: Check the specs. The vehicle must exceed 6,000 pounds (gross unloaded weight, or gross loaded weight for trucks and vans). Many luxury SUVs qualify; many don’t. And you must use it 100 percent for business to deduct 100 percent of the cost. 

Myth #3: “I’ll pick which equipment gets bonus depreciation and skip the rest.” 

Reality: Bonus depreciation applies to entire asset classes; you can’t cherry-pick. Buy a car and take bonus depreciation? You must take it for all five-year property that year. Section 179 gives you selective control; bonus depreciation doesn’t. 

Who Really Benefits? 

Businesses buying equipment, vehicles, or technology. 100 percent bonus depreciation with no cap means immediate, full write-offs. 

Real estate investors. Cost segregation plus 100 percent bonus depreciation can deliver jaw-dropping first-year write-offs on commercial and rental properties. 

Anyone buying heavy vehicles for business. The 6,000-pound provision lets you deduct the full cost of qualifying SUVs and trucks in year one. 

Capital-intensive industries. Construction, logistics, agriculture, and tech firms that regularly acquire expensive equipment will see outsized savings. 

Action Steps Before Year-End 

1. Inventory planned purchases. Identify equipment, vehicles, software, and other property you’ll buy. Timing matters: property must be placed in service during the tax year to claim the deduction.
2. Consider cost segregation. If you own commercial or residential rental property, a cost segregation study could unlock massive deductions. Book engineering firms now.
3. Track business use meticulously. For vehicles, log every mile. For mixed-use property, document the business percentage. Listed property requires at least 51 percent business use to claim bonus depreciation.
4. Decide: bonus depreciation or Section 179? For most businesses, bonus depreciation’s unlimited deduction wins. Use Section 179 only if you need selective control over which assets to expense or want to avoid creating a loss.
5. Coordinate with your tax pro. Don’t be too hasty to write off everything in year one.  These two deductions can be stacked and they interact with NOLs, AMT, and other provisions. Strategic planning now maximizes your savings.

The OBBBA’s depreciation changes are one of the key business-friendly tax changes. But the devil is in the details. Understand the vehicle caps, the asset class rules, and the timing windows. Keep clean records, document business use, and work with a tax professional to maximize these breaks. Your bottom line will thank you.