What is the allowable bonus depreciation if property is placed in service in 2025?
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For property placed in service in 2025, the allowable bonus depreciation is generally 100% of the adjusted basis of qualified property, provided the property is acquired after January 19, 2025. This is due to the enactment of the One Big Beautiful Bill Act (OBBBA), which permanently restored 100% bonus depreciation for most qualified property acquired and placed in service after January 19, 2025. This reverses the previously scheduled phase-down of bonus depreciation rates under prior law, which would have reduced the rate to 40% in 2025 and 20% in 2026, and eliminated it thereafter.
1. Key Details
- Qualified property includes most tangible property with a recovery period of 20 years or less, certain computer software, water utility property, and qualified film, television, and live theatrical productions, as defined in IRC §168(k).
- Property acquired under a binding contract entered into before January 20, 2025, is treated as acquired on the contract date, and the original phase-down schedule (i.e., 40% in 2025, 20% in 2026, 0% in 2027) may still apply to such property.
- Property acquired after January 19, 2025 and placed in service in 2025 is eligible for 100% bonus depreciation.
- Special rules apply for certain property with long production periods and certain aircraft, but for most property, the 100% rate applies.
2. Example
If a business acquires and places in service new machinery (with a class life of 7 years) in July 2025, and the acquisition was not subject to a binding contract before January 20, 2025, the business may deduct 100% of the cost of the machinery as bonus depreciation in 2025.
3. Summary Table
4. Additional Note
If the property was acquired under a binding contract before January 20, 2025, the phase-down rates (40% in 2025, 20% in 2026, 0% in 2027) may still apply.
In summary: For most property placed in service in 2025 and acquired after January 19, 2025, the allowable bonus depreciation is 100% of the adjusted basis.
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