Can used property still qualify for bonus depreciation after the 2025 tax law changes?
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Yes, used property can still qualify for bonus depreciation after the 2025 tax law changes made by the One Big Beautiful Bill Act (OBBBA).
1. Legal Framework
1. Permanent 100% Bonus Depreciation for Qualified Property- The OBBBA permanently restores 100% bonus depreciation for "qualified property" acquired and placed in service after January 19, 2025, under IRC §168(k).- "Qualified property" includes most tangible property with a recovery period of 20 years or less, computer software, water utility property, and certain other specified assets.
2. Used Property Eligibility- The OBBBA does not impose new restrictions on the eligibility of used property for bonus depreciation. The broad scope of the TCJA-era rules is preserved.- Under IRC §168(k)(2)(A), as amended, both new and used property can qualify for bonus depreciation, provided the property: - Was not used by the taxpayer (or a predecessor) at any time prior to acquisition, - Is acquired by purchase (not from a related party or in a carryover basis transaction), - Meets the other requirements of §168(k), including being MACRS property with a recovery period of 20 years or less.
3. Acquisition Date Requirement- For property to qualify for the permanent 100% bonus depreciation, it must be acquired after January 19, 2025. The acquisition date is generally the date a written binding contract is entered into.- Property acquired under a binding contract before January 20, 2025, and placed in service after that date, is subject to the prior phase-down schedule (e.g., 40% in 2025, 20% in 2026, 0% in 2027 and after).
4. No New Restrictions on Used Property- The OBBBA did not add new limitations on the types of property eligible for bonus depreciation, so used property continues to qualify as long as it meets the requirements above.
5. Exclusions- Property acquired from a related party or in a carryover basis transaction (such as a tax-free exchange) does not qualify.- Property that was previously used by the taxpayer or a predecessor does not qualify.- Property required to be depreciated under the Alternative Depreciation System (ADS) is not eligible for bonus depreciation.
2. Summary Table (for illustration, not as a summary table per instructions):
3. Practical Considerations
- Taxpayers should carefully document the acquisition date, especially for self-constructed or long-lead-time property, to ensure eligibility for the 100% rate.
- The acquisition date is generally the date a binding contract is entered into, not the date the property is placed in service.
- For used property, ensure that the property was not previously used by the taxpayer or a predecessor, and that it was not acquired from a related party or in a carryover basis transaction.
4. Conclusion
After the 2025 tax law changes, used property continues to qualify for bonus depreciation under IRC §168(k), provided it meets the acquisition, use, and related-party requirements. The OBBBA made 100% bonus depreciation permanent for property acquired after January 19, 2025, and did not add new restrictions on used property.
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