Tax Topic
Bonus Depreciation: 100% First-Year Write-Off Explained
Bonus depreciation allows businesses to deduct a large percentage (up to 100% under the One Big Beautiful Bill Act) of the cost of qualifying assets in the first year they're
Overview
Bonus depreciation lets you deduct up to 100% of the cost of qualifying business assets in the year you buy them. Unlike Section 179, there's no dollar cap and it can create a net operating loss you carry forward. The One Big Beautiful Bill Act (signed July 2025) restored 100% bonus depreciation through 2029.How Bonus Depreciation Works
When you buy qualifying property for your business, bonus depreciation lets you deduct a percentage of the cost immediately instead of spreading it over the asset's useful life. Under current law (post-OBBBA), you can deduct 100% in year one. This applies to both new and used property, as long as it's new to you. The asset must have a recovery period of 20 years or less under MACRS depreciation.What Qualifies
Most tangible business property with a MACRS recovery period of 20 years or less qualifies. This includes equipment, machinery, computers, furniture, vehicles, and qualified improvement property. It also covers certain computer software and qualified film/television/live theatrical productions. Real property improvements placed in service after 2017 may also qualify.
Current Bonus Depreciation Rates
The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, permanently restored 100% bonus depreciation for qualified property placed in service after January 19, 2025. Prior to the OBBBA, the TCJA's phase-down had reduced rates to 80% (2023) and 60% (2024). The OBBBA makes 100% the permanent rate going forward.
The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, permanently restored 100% bonus depreciation for qualified property placed in service after January 19, 2025. Prior to the OBBBA, the TCJA's phase-down had reduced rates to 80% (2023) and 60% (2024). The OBBBA makes 100% the permanent rate going forward.
Example: Rental Property Improvements
You spend $150,000 on a cost segregation study for a rental property, identifying $50,000 in 5-year property and $25,000 in 15-year land improvements. With 100% bonus depreciation, you deduct the entire $75,000 in year one instead of spreading it over 5-15 years. At a 32% bracket, that's $24,000 in immediate tax savings.
Bonus Depreciation vs. Section 179
Key differences: Bonus depreciation has no dollar limit (Section 179 caps at $1,250,000). Bonus depreciation can create a net operating loss that carries forward (Section 179 can't exceed business income). Bonus depreciation applies to all eligible assets automatically (Section 179 requires you to elect specific assets). Most tax professionals recommend using Section 179 first up to your income limit, then bonus depreciation for the rest.Cost Segregation Made Simple
Hivebooks helps real estate investors track property improvements and categorize them by recovery period, making cost segregation studies easier and bonus depreciation deductions clearer.
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