Bonus Depreciation
Bonus depreciation is a provision in the tax law that allows businesses (including landlords) to deduct a percentage of their qualified property purchases without limit. In 2024, bonus depreciation was 60% of qualified purchases. The remaining 40% of the purchase price was depreciated over the asset's class life.
The One, Big, Beautiful Bill Act increases bonus depreciation back to 100% and makes it permanent. This provision is for property acquired after January 19, 2025.
Qualified property is generally new or used personal property (i.e. machinery, equipment, furniture, and fixtures). Although certain real estate can qualify.
For property acquired after July 4, 2025, qualified production property ("QPP") will also be eligible for bonus depreciation. QPP is certain non-residential real property used in manufacturing, production (limited to agriculture and chemical) or refining of certain tangible personal property.
Taxpayers may elect out of the bonus depreciation provisions on an annual basis.
Section 179 Expenses
For property placed in service after 2024, businesses (landlords excluded) can expense up to $2,500,000 of up to $4,000,000 of qualified purchases. The Section 179 election cannot create a loss, unlike bonus depreciation. However, most states do not allow bonus depreciation, making Section 179 more versatile.
