100% Bonus Depreciation Is Now Permanent: What It Means for Your Equipment Plans
If you have been delaying an equipment purchase because bonus depreciation kept changing, you can breathe a little easier.
The One Big Beautiful Bill Act (OBBBA) made 100% bonus depreciation permanent for qualifying property acquired and placed in service after January 19, 2025. The previous phase-down schedule is gone.
That gives small business owners more room to plan. You do not have to rush a purchase simply because a temporary tax benefit may disappear next year.
The rules still require careful review. Section 179 has its own limits. Vehicles have special requirements. And buying equipment does not automatically make it deductible.
I want to make the changes easier to understand so you can plan with confidence.
What changed with bonus depreciation?
Before the OBBBA, bonus depreciation was scheduled to phase down over time. The deduction was expected to decrease for future purchases.
The OBBBA changed that schedule. For eligible property acquired and placed in service after January 19, 2025, the bonus depreciation rate is generally 100%.
In simple terms, your business may be able to deduct the full cost of qualifying property in the first year.
There is no dollar cap on the amount of property that may qualify for bonus depreciation. That makes it particularly useful for businesses making larger investments.
Qualifying property may include:
Machinery and production equipment.
Computers and technology.
Office equipment.
Certain furniture.
Qualified improvement property.
Some business vehicles.
Other eligible tangible property with a recovery period of 20 years or less.
The property must be used in your business. Personal-use property does not qualify simply because it is purchased through the business.
The property also generally needs to be placed in service during the tax year. That usually means it is installed, ready, and available for business use. Ordering equipment or signing a purchase agreement may not be enough.
The old phase-down cliff is no longer the main concern
The previous rules encouraged business owners to make decisions based on a shrinking tax percentage.
That created pressure. A business might buy equipment earlier than planned just to avoid losing part of the deduction.
The permanent 100% rate changes the conversation.
I can now help clients focus on the business decision first:
Do you need the equipment?
Will it improve operations?
Can your cash flow support the purchase?
Will it be ready for business use this year?
Does the deduction fit your overall tax plan?
You may still have reasons to purchase before year-end. But you no longer need to make a rushed purchase solely because bonus depreciation is scheduled to drop next year.
That is a much calmer way to plan.
Section 179 limits for 2026
Bonus depreciation is not the same as Section 179.
For tax year 2026, the Section 179 limits are:
Maximum Section 179 deduction: $2,560,000.
Phase-out threshold: $4,090,000 in qualifying property placed in service.
Once qualifying property exceeds the $4,090,000 threshold, the Section 179 deduction begins to decrease dollar for dollar.
Section 179 is also generally limited by your business taxable income. You may not be able to use the entire deduction if your business does not have enough qualifying income.
Bonus depreciation works differently. It does not have the same dollar cap. Depending on your situation, it may help you deduct qualifying costs that remain after Section 179 or provide another option for managing the deduction.
Your tax professional can determine which method is more appropriate. In some cases, a business may use Section 179 for certain assets and bonus depreciation for others. In other cases, taking the full deduction immediately may not be the best choice.
A larger deduction is not always a better result. The goal is a tax plan that supports your business now and in future years.
What IRS Notice 2026-11 explains
The IRS issued Notice 2026-11 as interim guidance for the OBBBA changes to bonus depreciation.
The notice says taxpayers may generally continue relying on existing bonus depreciation regulations, with updates for the new permanent 100% rule and its effective dates.
The notice also provides guidance on several important details:
The acquisition date matters.
Written binding contracts can affect eligibility.
Existing rules help determine when property is considered acquired.
Certain component elections remain available.
Taxpayers may have an election to use a 40% bonus rate for the first tax year ending after January 19, 2025, where applicable.
One important point is the difference between property acquired before and after January 20, 2025.
Property covered by a written binding contract entered into before January 20, 2025, may not qualify for the new permanent 100% rate. The previous phase-down rules may apply instead.
This is why I recommend keeping purchase agreements, invoices, delivery records, and installation documents together. Good records make the tax treatment easier to confirm.
Year-end planning for equipment
Equipment purchases deserve more than a quick look at the tax deduction.
Before you buy, I recommend reviewing these points:
1. Confirm the business need
Do not purchase equipment only because it creates a deduction.
Start with the operational reason. Will the equipment save time? Increase capacity? Improve quality? Replace an unreliable asset?
A tax deduction can reduce taxable income. It does not make the purchase free.
2. Check the placed-in-service date
If you want the deduction for 2026, the equipment generally needs to be ready and available for business use during 2026.
Ask the vendor about:
Expected delivery.
Installation timing.
Setup requirements.
Training or testing.
Whether the equipment can actually be used before December 31.
A purchase made in December may belong to a later tax year if it is not ready for use.
3. Review the financing
Financing may still allow the business to claim depreciation when the asset is placed in service, but the details matter.
Review the contract. Confirm who owns the asset. Separate the equipment cost from interest, service agreements, supplies, and other charges.
Keep the full loan and purchase documents with your bookkeeping records.
4. Check your cash flow
A first-year deduction does not replace cash flow planning.
Use a forecast before committing to a large purchase. Our stress-free forecasting guide can help you think through upcoming payments, taxes, and operating costs.
The best purchase is one your business can comfortably support.
Planning for business vehicles
Vehicles can qualify for depreciation, but the rules are more detailed.
The deduction may depend on:
The vehicle’s classification and weight.
The percentage used for business.
Whether the vehicle is owned or leased.
When it is placed in service.
Whether personal use is properly tracked.
Applicable passenger vehicle limits.
Whether Section 179 has special restrictions for that vehicle type.
A vehicle used 100% for business requires strong records. A vehicle used for both business and personal purposes must be allocated between those uses.
Before purchasing, create a simple mileage and usage process. Record the date, destination, business purpose, and miles. Keep personal and business use separate.
Do not assume a business name on the title makes the entire cost deductible. The actual business use matters.
Planning for furniture and office improvements
Furniture and office items may also qualify for accelerated deductions, depending on the property and how it is used.
Examples may include:
Desks and workstations.
Office chairs.
Filing cabinets.
Shelving.
Specialized furniture.
Computers and monitors.
Certain improvements to leased business space.
Create an asset list before year-end. Include the purchase date, cost, location, and date placed in service.
This is especially helpful when you buy several items at once. It prevents furniture, supplies, repairs, and improvements from being mixed together.
A simple year-end equipment checklist
Here is the process I recommend for small business owners:
List the equipment, vehicles, and furniture you are considering.
Separate business purchases from personal purchases.
Confirm each item’s expected delivery and placed-in-service date.
Review purchase agreements for binding-contract dates.
Estimate business-use percentages.
Compare Section 179 and bonus depreciation.
Check taxable income and cash flow.
Save invoices, contracts, financing documents, and delivery records.
Update your fixed-asset list.
Review the plan with your tax professional before filing.
Accurate books make this process much easier. If your asset records need attention, our late-August bookkeeping tune-up offers a practical place to start.
The takeaway
The permanent 100% bonus depreciation rule gives business owners more certainty.
You can plan equipment purchases based on business needs instead of chasing a temporary phase-down schedule. Section 179 remains available, with a 2026 limit of $2,560,000 and a $4,090,000 phase-out threshold. IRS Notice 2026-11 provides interim guidance while additional regulations develop.
The right next step is not always to buy. It is to understand the timing, document the purchase, and confirm how the deduction fits your complete tax picture.
I help business owners keep their books in perfect order and move through these decisions step by step. If equipment planning feels confusing, Jenni’s Business Services can help you create a clear plan for your bookkeeping and tax needs.
This article is for general information and is not tax or legal advice. Tax rules can vary based on your business structure, income, asset type, business use, and other facts. Please consult your tax professional before making a purchase or claiming a deduction.
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