Bonus Depreciation 2025: What Small Business Owners Need to Know

Small business owners looking to make strategic capital investments in 2025 just got a major tax break. Thanks to President Trump’s recently signed One Big Beautiful Bill, 100% bonus depreciation is back—and it’s here to stay.

This legislation not only revives full bonus depreciation but also significantly increases Section 179 expensing limits. If you're planning to upgrade equipment, invest in property, or expand operations, 2025 is the time to act.

What Is Bonus Depreciation and What Changed in 2025?

Bonus depreciation lets businesses immediately deduct the full cost of qualified property—like machinery, computers, and improvements—rather than depreciating it over several years.

The One Big Beautiful Bill permanently restores 100% bonus depreciation for property placed in service after January 19, 2025. This reverses the previously scheduled phase-down (which would have reduced the deduction to 40% in 2025).

Highlights:

• Applies to both new and used property

• Covers most tangible personal property and certain real estate improvements

• No cap on total deduction amount

• Enhanced expensing for qualified production property through 2033

This change opens the door to enormous tax savings for small businesses making capital purchases this year and beyond.

Section 179 Expensing: Bigger Limits, Greater Flexibility

Section 179 allows businesses to deduct the full cost of qualifying purchases (up to a certain limit) in the year they're placed in service.

Under the new bill:

• The annual deduction cap is increased to $2.5 million

• The phase-out threshold rises accordingly, benefiting more small businesses

• Applies to business-use assets used at least 50% of the time

Key differences from bonus depreciation:

• You can choose which assets to expense

• It’s limited to your business’s income (can’t create a net loss)

• Often used in tandem with bonus depreciation

Capital Investments That Qualify

Both Section 179 and bonus depreciation apply to a wide range of capital investments, including:

• Equipment and machinery

• Computers and off-the-shelf software

• Office furniture

• Qualified improvement property (QIP)

• Business vehicles over 6,000 lbs

• Select building components (with cost segregation)

  
  

Timing is critical: Property must be placed in service by December 31, 2025 to qualify for 2025 deductions.

Leverage Cost Segregation to Maximize Deductions

One of the most powerful tools for businesses that own real estate is cost segregation. This strategy breaks down building components (e.g., lighting, flooring, landscaping) into shorter depreciation classes, making them eligible for 100% bonus depreciation under the new law.

When combined with Section 179 and the new bill’s provisions, this strategy can significantly reduce your tax bill in the first year of purchase.

Strategic Planning Tips for 2025

With these tax rules in place, here’s how small businesses can make the most of them:

1. Plan major purchases now – Take advantage of 100% write-offs before year-end.

2. Time it right – Property must be placed into service (not just purchased) in 2025.

3. Do a cost segregation study – Accelerate depreciation on real estate.

4. Use both tools – Combine Section 179 and bonus depreciation where possible.

5. Consult your tax advisor – Optimize your approach based on income and growth plans.

Conclusion

The One Big Beautiful Bill gives small business owners a rare opportunity to fully deduct qualifying capital investments in 2025. With 100% bonus depreciation permanently restored and Section 179 limits expanded, now is the time to invest in growth.

Whether you're upgrading your equipment, buying a new vehicle, or enhancing your facilities, taking action this year could deliver huge tax benefits.

Want help planning your 2025 capital investments for maximum tax savings? Schedule a 30-minute consultation here