How does the 2025 tax law affect the bonus depreciation amount for newly placed property?
Ask Blue J any tax question, then go deeper. Follow up, add client-specific context, and explore the sources behind every answer with Blue J’s generative AI solution for tax research.
The 2025 tax law, enacted as the One Big Beautiful Bill Act (OBBBA), makes significant and permanent changes to bonus depreciation for newly placed property:
1. Permanent 100% Bonus Depreciation for Qualified Property
Key Change:- The law restores and makes permanent 100% bonus depreciation for "qualified property" acquired and placed in service after January 19, 2025. This means that businesses can immediately deduct the full cost of eligible property in the year it is placed in service, rather than depreciating it over several years.
Transition Rule:- For property acquired or placed in service before January 20, 2025, or under a binding contract before that date, the previous phase-down schedule applies (e.g., 40% bonus depreciation for property placed in service in 2025, 20% in 2026, and 0% in 2027 and later).
Qualified Property Includes:- Most tangible property with a MACRS recovery period of 20 years or less (e.g., machinery, equipment, computers, certain vehicles, and qualified improvement property).- Computer software defined in and depreciated under IRC §167(f)(1).- Water utility property.- Qualified film, television, and live theatrical productions.- Certain plants bearing fruits and nuts, if planted or grafted after January 19, 2025.
Used Property:- The 100% bonus depreciation applies to both new and used property, provided the property is acquired and placed in service after January 19, 2025, and meets all other requirements (e.g., not acquired from a related party, not previously used by the taxpayer).
Order of Deductions:- Section 179 expensing (if elected) is applied first, then bonus depreciation, and then regular MACRS depreciation on any remaining basis.
2. Special Rule for Qualified Production Property (QPP)
- The law introduces a new elective 100% bonus depreciation for certain nonresidential real property used in "qualified production activities" (manufacturing, production, or refining of tangible personal property) under IRC §168(n). This applies to property for which construction begins after January 19, 2025, and before January 1, 2029, and is placed in service by the end of 2030. However, property used for offices, administration, lodging, parking, sales, research, or software engineering is excluded, as is property held for lease.
3. Effective Dates
- 100% bonus depreciation applies to property acquired and placed in service after January 19, 2025.
- For property acquired or under a binding contract before January 20, 2025, the old phase-down rates (e.g., 40% in 2025, 20% in 2026) still apply.
4. Summary Table
5. Practical Implications
- Businesses can immediately expense the full cost of eligible property, improving after-tax cash flow and reducing the cost of capital for new investments.
- The change is permanent, providing long-term certainty for tax planning and investment decisions.
In summary: The 2025 tax law makes 100% bonus depreciation permanent for most new and used qualified property acquired and placed in service after January 19, 2025, and introduces a new 100% expensing provision for certain production-related real property.
Was this answer helpful?
What Blue J customers are saying
“We are excited to use Blue J to elevate the initial work product our team is able to produce."
"We’re incorporating Blue J to ensure our people are well-equipped with a research tool that delivers on both ease of use and quality of deliverable. It will save us a lot of time as a starting point, so we can focus our efforts on the analysis. Ultimately, it helps us get to the right answer, faster.”
"We’re incorporating Blue J to ensure our people are well-equipped with a research tool that delivers on both ease of use and quality of deliverable. It will save us a lot of time as a starting point, so we can focus our efforts on the analysis. Ultimately, it helps us get to the right answer, faster.”
"We had used Checkpoint for a long time but found it wasn’t particularly well-used in our practice."
"A lot of our practitioners would have to turn to Google to find what they were looking for, which of course isn’t ideal. Blue J is a real game-changer when it comes to this, since it combines the efficiency of Google with the authoritative tax materials our people really need to serve their clients best. At ELO, we pride ourselves on providing services that are focused on value for clients and exceeding their expectations. Adding Blue J to our toolbox will enable us to do just that, as we continue to evolve our service offerings to better serve our clients’ needs.”
"A lot of our practitioners would have to turn to Google to find what they were looking for, which of course isn’t ideal. Blue J is a real game-changer when it comes to this, since it combines the efficiency of Google with the authoritative tax materials our people really need to serve their clients best. At ELO, we pride ourselves on providing services that are focused on value for clients and exceeding their expectations. Adding Blue J to our toolbox will enable us to do just that, as we continue to evolve our service offerings to better serve our clients’ needs.”
"We find this tool to be a game-changer for us and our clients.”
“We had the opportunity to pilot some other AI solutions in the market, and found that the improvement over traditional search was limited - except in Blue J’s case, where the efficiency gain over traditional research methods is significant."
“We had the opportunity to pilot some other AI solutions in the market, and found that the improvement over traditional search was limited - except in Blue J’s case, where the efficiency gain over traditional research methods is significant."
“Blue J is an exciting technology because it enables the practitioner to remain in the driver’s seat of the analysis."
"Thoughtful functions are included to encourage and facilitate deeper analysis, not to replace or reduce it. We’ll continue to find new and impactful ways to leverage the technology, which has benefited our clients and staff alike. At RSM we strive to be compelling to our clients and to be digital by embracing new technologies to fulfill that promise.”
"Thoughtful functions are included to encourage and facilitate deeper analysis, not to replace or reduce it. We’ll continue to find new and impactful ways to leverage the technology, which has benefited our clients and staff alike. At RSM we strive to be compelling to our clients and to be digital by embracing new technologies to fulfill that promise.”
"We wanted to have a tool that people were using at all staff levels."
"We wanted something that lived up on their third screen - something that would be available and helpful to them every day. What we've found is it's been easy to get people to get into the habit of using Blue J because it helps people. Blue J allows us to quickly respond to client questions in a way that they can understand it, which helps us deal with the volume of client questions that come in. We were up and running very quickly with Blue J - within 5 minutes, our staff understood how this will be helpful, and the rest of the training program is refining prompting skills and building use cases and best practices."
"We wanted something that lived up on their third screen - something that would be available and helpful to them every day. What we've found is it's been easy to get people to get into the habit of using Blue J because it helps people. Blue J allows us to quickly respond to client questions in a way that they can understand it, which helps us deal with the volume of client questions that come in. We were up and running very quickly with Blue J - within 5 minutes, our staff understood how this will be helpful, and the rest of the training program is refining prompting skills and building use cases and best practices."
