If you’re a small business owner considering a large purchase—like equipment, vehicles, or even certain types of property—bonus depreciation might offer a major tax advantage. But like any strategy, it comes with trade-offs. At Wilson Accounting Group, we help clients weigh the pros and cons of bonus depreciation to make sure their investment decisions are both tax-smart and financially sound.

Let’s break down what bonus depreciation is, how it works, and whether now is the right time to invest in new business assets.

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Bonus depreciation is a tax incentive that allows businesses to immediately deduct a large percentage (up to 100%) of the cost of qualified assets in the year they are placed in service, rather than depreciating them over several years.

Under the OBBB, businesses could deduct 100% of the cost of eligible assets placed in service after January 19, 2025.

• Machinery and equipment
• Office furniture
• Business vehicles
• Qualified leasehold improvements
• Computer systems and software

Tip: Don’t wait until equipment breaks down unexpectedly. Proactively replacing aging assets before year-end may result in a bigger tax break and smoother business operations.

Immediate Tax Savings

Instead of spreading deductions over 5, 7, or 15 years, you can write off a significant portion of the purchase right away—reducing your taxable income for the current year.

Improved Cash Flow

A reduced tax bill means more cash left in your business. This can be reinvested in growth, debt reduction, or working capital.

Encourages Timely Upgrades

If your business relies on equipment or technology, bonus depreciation is a strong incentive to upgrade before something breaks and disrupts productivity.

No Income Limits

Unlike Section 179, bonus depreciation can create a net operating loss (NOL) and doesn’t have an annual deduction limit—making it useful for larger businesses or high-cost purchases.

Reduces Future Deductions

By accelerating depreciation into the current year, you lose the ability to deduct those amounts in future years—potentially increasing your taxable income down the road.

Not All Property Qualifies

Real estate and buildings generally don’t qualify unless they are qualified improvement property (QIP). Land never qualifies.

Complex Rules for Partial Business Use

If you’re buying a vehicle or asset that is only partially used for business (like a work truck used personally), the bonus depreciation deduction may be limited—or disallowed.

Impact on Financial Statements

If you’re seeking financing or investment, large deductions may affect your book income, which some lenders or investors may view less favorably.

In most cases: yes. Waiting until equipment fails can:

• Halt productivity
• Create emergency repair or replacement costs
• Miss out on potential tax deductions if the purchase is delayed

With bonus depreciation still available at 40% in 2025, replacing outdated equipment before it breaks is not just smart for operations—it may also save you significantly in taxes.

Every business is different. Before you make a big purchase, consult with our tax professionals to:

• Review your eligibility for bonus depreciation
• Project the short- and long-term tax impact
• Strategize around timing purchases before year-end
• Evaluate whether Section 179 or bonus depreciation is a better fit for your situation

If you’re thinking of buying property, equipment, or making capital improvements, let Wilson Accounting Group help you evaluate the best strategy for your tax savings and business growth. Timing your purchases right can make a big difference come tax season.