Are there any phase-out limits or changes to bonus depreciation rates for property placed in service after 2025?
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For property placed in service after 2025, there are no longer any phase-out limits or reductions to bonus depreciation rates. The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, permanently restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. This reverses the phase-down schedule that was previously in effect under the Tax Cuts and Jobs Act (TCJA), which would have reduced bonus depreciation to 40% in 2025, 20% in 2026, and 0% in 2027 and beyond.
1. Key details:
- 100% bonus depreciation is now permanent for most tangible property with a recovery period of 20 years or less, including both new and used property (subject to the acquisition and use requirements).
- The OBBBA eliminated the previously scheduled phase-down, so there is no reduction in the bonus depreciation rate for property placed in service after 2025.
- The 100% rate applies to property acquired after January 19, 2025. For property acquired under a binding contract before that date, the old phase-down schedule may still apply.
- Taxpayers may still elect out of bonus depreciation for any class of property placed in service during a taxable year.
2. Summary Table: Bonus Depreciation Rates (Section 168(k))
3. Conclusion
There are no phase-out limits or reductions to bonus depreciation rates for property placed in service after 2025. The rate is 100% and is permanent under current law. Taxpayers should ensure that property is acquired after January 19, 2025, to qualify for the 100% rate; otherwise, the old phase-down may still apply to property acquired earlier under a binding contract.
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