100% Bonus Depreciation Is Now Permanent — How to Claim It
You Can Now Deduct 100% of Equipment Purchases — Forever
The single biggest tax break for small businesses in a decade just became permanent. On January 14, 2026, the IRS released Notice 2026-11 with interim guidance confirming that 100% bonus depreciation — the ability to deduct the entire cost of qualifying assets in the year you buy them — is now a permanent feature of the U.S. tax code under the One Big Beautiful Bill Act (OBBBA).
That means if you bought a $50,000 truck, a $200,000 piece of manufacturing equipment, or a $15,000 computer setup for your office last year, you can write off every penny on your 2025 tax return. Not over five years. Not over seven. All of it, this year.
For small-business owners filing returns right now, this is money back in your pocket — if you know how to claim it. Here's everything you need to know.
What Changed — and Why It Matters Now
Bonus depreciation has a rocky history. Congress introduced 100% first-year expensing in the Tax Cuts and Jobs Act of 2017, but it was designed to phase out: dropping to 80% in 2023, 60% in 2024, 40% in 2025, and disappearing entirely by 2027.
The OBBBA, signed into law on July 4, 2025, reversed that phase-out completely. Here's the timeline:
| Tax Year | Previous Law | Under OBBBA |
|---|---|---|
| 2023 | 80% deduction | 80% (no change retroactively) |
| 2024 | 60% deduction | 60% (no change retroactively) |
| 2025 | 40% deduction | 100% deduction (for property acquired after Jan. 19, 2025) |
| 2026 and beyond | Continued phase-out to 0% | 100% deduction — permanently |
The key date is January 19, 2025. Any qualifying property both acquired and placed in service on or after that date qualifies for the full 100% write-off. The IRS guidance in Notice 2026-11 clarifies exactly how those timing rules work.
What Qualifies for 100% Bonus Depreciation
Not everything you buy qualifies. Here's what does — and what doesn't:
Eligible Assets
- Vehicles — trucks, vans, cars used for business (subject to luxury auto limits for passenger vehicles)
- Equipment and machinery — manufacturing equipment, tools, construction equipment
- Computers and technology — servers, laptops, monitors, networking equipment
- Office furniture — desks, chairs, filing systems, shelving
- Qualified improvement property — interior improvements to nonresidential buildings (HVAC, roofing, fire protection, security systems)
- Software — off-the-shelf business software
Key Rules to Know
The property must have a recovery period of 20 years or less under the Modified Accelerated Cost Recovery System (MACRS). Both new and used assets qualify, as long as you haven't previously used the asset and you acquired it in an arm's-length transaction.
According to Cherry Bekaert's analysis of Notice 2026-11, the two critical dates are:
- Acquisition date — when a binding contract is entered into
- Placed-in-service date — when the asset is ready and available for use
Both dates must fall on or after January 19, 2025, to qualify for the full 100% deduction.
What Doesn't Qualify
- Land and land improvements
- Buildings and structural components (unless qualified improvement property)
- Property with a recovery period longer than 20 years
- Property used outside the United States
- Assets acquired from related parties
How Much Can This Actually Save You?
Let's run the numbers for a few common small-business scenarios:
| Purchase | Cost | Tax Bracket | Approximate Tax Savings |
|---|---|---|---|
| Work truck | $55,000 | 24% | $13,200 |
| Restaurant kitchen equipment | $120,000 | 32% | $38,400 |
| Office buildout (QIP) | $80,000 | 24% | $19,200 |
| Laptops + servers | $25,000 | 22% | $5,500 |
| Manufacturing equipment | $300,000 | 32% | $96,000 |
Without bonus depreciation, you'd spread those deductions over 5 to 15 years. With 100% expensing, you get the entire tax benefit in year one. That's cash you can reinvest immediately.
The QBI Bonus
Here's a detail most articles miss: the OBBBA also made the Qualified Business Income (QBI) deduction permanent. Pass-through businesses (S-corps, LLCs, sole proprietors, partnerships) can deduct up to 20% of their qualified business income. And starting in 2026, there's a new guaranteed minimum deduction of $400 for anyone with at least $1,000 of QBI.
When you combine 100% bonus depreciation with the QBI deduction, the effective tax savings can be even larger than the table above suggests.
How to Claim It on Your 2025 Tax Return
If you're filing your 2025 return now (or your accountant is), here's exactly what needs to happen:
Step 1: Identify Qualifying Purchases
Go through your 2025 records and identify every asset purchase made on or after January 19, 2025. Check that each asset:
- Has a MACRS recovery period of 20 years or less
- Was both acquired and placed in service after January 19, 2025
- Meets the arm's-length transaction requirement for used assets
Step 2: File IRS Form 4562
Bonus depreciation is claimed on Form 4562 (Depreciation and Amortization). Your qualifying assets go in Part II (Special Depreciation Allowance), not Part I (Section 179).
Important distinction: Section 179 and bonus depreciation are different deductions. Section 179 has a cap ($1,250,000 for 2025) and phases out at higher spending levels. Bonus depreciation has no dollar limit. You can use both on the same asset, but bonus depreciation applies to any remaining basis after Section 179.
Step 3: Consider the 40% Election
The OBBBA gives taxpayers the option to elect 40% bonus depreciation instead of 100% for the first tax year ending after January 19, 2025. Why would you take less?
- If your income is unusually low this year and you expect higher income next year
- If you're in a low tax bracket now but expect to be in a higher one soon
- If you want to spread deductions across multiple years for planning purposes
For most small businesses, the full 100% deduction is the right call. But talk to your CPA if you're in an unusual situation.
Three Mistakes That Could Cost You the Deduction
1. Missing the January 19 Cutoff
Assets acquired before January 19, 2025, under the old phase-out rules only qualify for 40% bonus depreciation in 2025. The date the contract became binding matters — not just when you received the asset. Wilson Lewis CPAs note that this is one of the most common errors in early filings.
2. Confusing "Acquired" with "Placed in Service"
You might have signed a purchase agreement in February 2025, but if the equipment wasn't installed and ready for use until 2026, you can't claim it on your 2025 return. Both dates matter.
3. Forgetting Qualified Improvement Property
Interior improvements to leased commercial space — new flooring, lighting, HVAC systems, security — qualify as QIP with a 15-year recovery period. Many business owners don't realize these interior buildout costs can be fully expensed in year one. If you renovated your office, store, or restaurant last year, check with your accountant.
Why This Is a Game-Changer for Small Business Growth
Permanent 100% bonus depreciation fundamentally changes how small businesses should think about capital investment. Under the old phase-out rules, there was always pressure to "buy now before the deduction drops." That artificial urgency led to rushed decisions and poorly timed purchases.
Now, you can plan capital investments based on business need, not tax deadlines. Need a new delivery van in 2028? The full deduction will still be there. Planning a major equipment upgrade in 2030? Same deal.
This predictability makes it easier to forecast cash flow, plan budgets, and make smarter investments — especially when you have the right tools.
How Real-Time Financial Visibility Makes This Even More Powerful
Knowing you can deduct 100% of an asset purchase is one thing. Knowing whether your cash flow can actually support that purchase is another.
This is where tools like CFO bot become essential. By connecting directly to your QuickBooks, Xero, or Stripe accounts, Profit Leap's AI CFO gives you real-time visibility into your cash position, upcoming obligations, and projected runway. Before you commit to a $100,000 equipment purchase, you can ask your AI CFO whether the numbers work — and get an answer in seconds, not days.
And if the tax implications get complex (like choosing between 100% and 40% bonus depreciation, or layering in Section 179), Profit Leap's CPA backstop ensures you have a real human expert reviewing the decision. It's like having a CFO and a CPA on call 24/7, at a fraction of the cost.
The Bottom Line
The permanent restoration of 100% bonus depreciation is the most significant small-business tax provision in years. If you bought equipment, vehicles, technology, or made interior improvements in 2025, you can deduct the full cost right now.
Don't leave money on the table. Review your 2025 purchases, file Form 4562, and make sure your accountant is applying the post-OBBBA rules — not the old phase-out schedule.
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