What CPAs ought to know in regards to the return of 100% bonus depreciation in 2025

A consumer calls with a query: “I simply purchased a warehouse and spent $250,000 enhancing it. Can I deduct all of that this yr?”

If the enhancements have been positioned in service after Jan. 19, 2025 — and if the binding acquisition contract was signed after that very same date — the reply is perhaps sure, because of the everlasting reinstatement of 100% bonus depreciation beneath the One Large Stunning Invoice Act.

This text breaks down what modified and the way CPAs may help purchasers take full benefit. Whether or not your purchasers are investing in industrial buildings, launching new ventures or enhancing current properties, this replace creates contemporary alternatives for accelerated deductions.

New guidelines to know

Earlier than OBBBA, bonus depreciation was set to part down:

• 60% in 2024
• 40% in 2025
• 20% in 2026
• 0% in 2027

OBBBA scrapped that phase-down and completely restored 100% bonus depreciation for certified property positioned in service after Jan. 19, 2025, as long as the binding contract to accumulate the property was signed on or after that very same date.

That timing distinction is crucial. The tax therapy for in any other case equivalent properties may differ dramatically based mostly on each the placed-in-service date and the date the acquisition contract was executed.

How placement and contract dates have an effect on eligibility

Let’s take an instance: Your consumer buys a $2 million warehouse and spends $250,000 on lighting, electrical and flooring upgrades.

• If positioned in service on Jan. 15, 2025 (with a contract signed earlier than Jan 19), they solely qualify for 40% bonus depreciation.
• If positioned in service on Jan. 22, 2025 (with a contract signed after Jan 19), they qualify for 100% bonus.

That shift may imply the distinction between writing off $100,000 or the total $250,000 in yr one.

Bonus depreciation applies to five-, seven- and 15-year belongings — elements sometimes recognized in a price segregation research. For purchasers making main capital investments, clarifying these dates early is crucial.

Belongings that qualify

100% bonus depreciation stays accessible for property with a MACRS restoration interval of 20 years or much less, together with:

• Furnishings, fixtures, and tools;
• Inside finishes and flooring;
• Certified Enchancment Property;
• Exterior enhancements like landscaping, paving or web site lighting.

Used property nonetheless counts, so long as the taxpayer did not beforehand use it themselves.
For brand new acquisitions or enchancment tasks, proactively figuring out these belongings permits for smoother coordination along with your tax and engineering groups.

Key alternatives for CPAs

In the event you work with actual property buyers, skilled service corporations or enterprise house owners, this is how this new framework impacts your advisory function:

• Mannequin depreciation eventualities to tell estimated funds and money move.
• Consider placed-in-service dates alongside contract signing dates.
• Coordinate any wanted Kind 3115 filings for methodology adjustments if prior belongings have been misclassified.
• Have interaction value segregation consultants early to have research prepared earlier than submitting deadlines.

As a result of 100% bonus depreciation is now a everlasting characteristic of the Tax Code beneath OBBBA, the urgency to beat a phase-out is gone, however strategic timing nonetheless issues, particularly round contract dates and placed-in-service triggers.

Bringing all of it collectively in your purchasers

100% bonus depreciation is now completely restored. This adjustments how purchasers ought to plan for 2025 and past.

It isn’t about chasing deductions only for the sake of it, it is about making use of the Tax Code strategically so your purchasers seize these advantages compliantly and thoughtfully.

Whether or not you are advising an actual property syndicator, a rising skilled providers agency or a enterprise proprietor increasing operations, now’s the time to overview placed-in-service guidelines, contract timelines, asset classifications and total depreciation technique.

To run fast estimates on potential financial savings, you need to use a Price Seg Calculator. It is a easy technique to mannequin whether or not bonus depreciation makes a fabric distinction in your consumer’s numbers.