100% Bonus Depreciation Is Permanent Now – What That Means for Your Next Capital Purchase
A client of RYBD bought $180,000 of equipment last November. When we sat down to do his return this spring, he was expecting to deduct it over five years, a roughly $36,000 deduction per year.
Instead, we wrote off the entire $180,000 against his 2025 income. The same equipment, the same purchase, but a tax outcome four times larger than he expected.
This kind of outcome is now permanent. Under the One Big Beautiful Bill Act passed in 2025, 100% bonus depreciation is no longer phasing out, it’s the new normal for eligible business property purchased after January 19, 2025.. And the math on capital purchase decisions has fundamentally shifted.
What Changed
For several years, the bonus depreciation percentage was scheduled to phase down. From 80% in 2023 to 60% in 2024 to 40% in 2025 (under the prior schedule), eventually disappearing altogether. Business owners and their CPAs spent a lot of energy timing purchases to capture the disappearing benefit.
The OBBBA reversed that. As of the 2025 tax year:
- 100% bonus depreciation is permanent for qualified business property placed in service in January 19, 2025 and beyond
- Section 179 expensing limits jumped to $2.5 million, with phase-out starting at $4 million
- R&D expensing was restored, meaning qualified research costs are fully deductible in the year incurred, rather than amortized over five years
The legislative anxiety is over. The planning math is settled. And business owners need to factor that into every meaningful capital purchase they’re considering.
What Qualifies (and What Doesn’t)
100% bonus depreciation applies to most tangible business property with a useful life of 20 years or less. Practically, that means:
Generally qualifies:
- Equipment, machinery, and tools
- Office furniture and fixtures
- Computers, servers, and technology infrastructure
- Vehicles (with specific rules for those used personally)
- Qualified improvement property (interior improvements to nonresidential buildings)
- Most farm equipment
Generally doesn’t qualify:
- Real estate itself (land and buildings)
- Inventory
- Intangible assets like patents and copyrights
- Property used outside the U.S.
- Property held for personal use
For real estate, however, cost segregation studies can identify components of a building that do qualify (lighting systems, specialty plumbing, parking lots, landscaping). A cost seg study on a $2 million commercial property may reclassify $300,000 to $500,000 into bonus-eligible categories.
“Placed in Service” Matters More Than People Realize
The deduction is available when property is “placed in service”, meaning ready and available for its intended use in the business. The purchase date doesn’t matter; the in-service date does.
This catches a lot of business owners by surprise. Equipment purchased December 30 but not delivered until January 5 doesn’t qualify for that tax year. Equipment installed but waiting on a permit doesn’t qualify until the permit is in hand. Equipment delivered but not yet trained on or commissioned may or may not qualify depending on the facts.
If you’re making a year-end capital purchase to capture a tax deduction, the conversation with your vendor about delivery and commissioning timing is as important as the conversation about price.
How This Should Change Your Decisions
The most common mistake we see is business owners delaying capital purchases to “save money.” With 100% bonus depreciation, that math is often wrong.
The equipment that helps the business run faster, generate more revenue, or reduce labor costs is meaningfully cheaper than it appears. For a profitable business, the question “can we afford to delay this?”
What to Discuss With Your CPA This Year
Three conversations every business owner should have with their CPA in 2026:
- The capital expenditure plan: What’s on the wish list? What’s the ROI on each piece? What does the after-tax math actually look like at this year’s income level?
- The cost segregation question: If you own commercial real estate or made significant improvements in recent years, a cost seg study may unlock deductions you’re not capturing.
- The R&D credit question: With R&D expensing restored, businesses that develop or improve products, processes, or software should look closely at whether they qualify for the credit too.
The Bottom Line
The OBBBA didn’t create new opportunities so much as it locked in opportunities that had been at risk. The tax code is now decidedly more favorable to capital investment than it has been in years.
For growth-stage businesses, this is a meaningful tailwind. The owners who recognize it and plan around it will outperform the owners who don’t.
What’s the capital purchase you’ve been delaying? Get with RYBD today.