The new tax law implemented in July 2025 has transformed how your business can write off equipment purchases. If you've been putting off that equipment investment or wondering about your tax strategy, this changes everything. The restoration of 100% bonus depreciation means you can now deduct the full purchase price of qualifying equipment in the year you buy it – not spread over multiple years.
What is 100% Bonus Depreciation?
Bonus depreciation allows businesses to immediately deduct the full cost of qualifying equipment rather than depreciating it over the asset's useful life. Think of it as an accelerated tax benefit that puts cash back in your pocket right away.
Before the new tax law, bonus depreciation had been phasing down since 2023, dropping to just 40% in 2025. Now it's back to 100% and runs through December 31, 2029, without any phase-down. This creates a five-year window of maximum tax advantage for equipment investments.
If you purchase $100,000 in qualifying equipment, you can deduct the entire $100,000 this year instead of spreading smaller deductions over five to seven years.
At a 21% corporate tax rate, that's $21,000 in immediate tax savings.
For businesses in the 37% bracket, the same $100,000 equipment purchase saves $37,000 in taxes immediately.
Here's the Immediate Impact
Most business equipment with a useful life of 20 years or less qualifies for 100% bonus depreciation
What Equipment Qualifies
Manufacturing & Production
Machinery and production equipment
Assembly line systems and automation
Quality control and testing equipment
Material Handling systems
Construction & Transportation
Commercial trucks and delivery vehicles
Excavators, bulldozers, and earthmoving equipment
Cranes and lifting equipment
Specialized construction tools
Industry-specific Equipment
Restaurant kitchen equipment and furniture Medical diagnostic and treatment equipment
Retail fixtures and displays
Agricultural machinery and equipment
Technology & Office
Computer hardware and servers
Networking and telecommunications equipment
Office furniture and fixtures
Point-of-sale systems
What doesn't qualify: Real estate, buildings, and equipment with useful lives over 20 years don't qualify for bonus depreciation. However, land improvements, qualified improvement property, and certain building systems may qualify.
One key phrase to keep in mind is "placed in service." Equipment must be purchased and ready for its intended use within the tax year to claim the deduction. Simply ordering or receiving equipment isn't enough – it must be installed, tested, and operational.
Critical Timing Requirements
Example Timing Scenarios
Equipment delivered December 15th but not installed until January
No 2025 deduction
Equipment delivered and operational by December 30th
Full 2025 deduction available
Qualifies for 2025 deduction
Equipment ordered in 2024 but delivered and operational in 2025
This timing requirement makes planning crucial, especially for larger equipment purchases that require installation and setup time.
Let's look at specific examples across different business types.
Real-World Financial Impact
Restaurant Equipment Package
Equipment (kitchen equipment, PoS systems, furniture)
Tax bracket
Immediate tax savings
True first-year cost
Monthly financing on $150,000 at 7%
$150,000
37%
$55,500
$94,500
$2,150
$1,386
Net monthly cost after tax savings
Equipment (excavator, trucks, compactors)
Tax bracket
Immediate tax savings
True first-year cost
$500,000
21%
$105,000
$395,000
Tax savings offset 21 months of payments
Monthly financing impact
Construction Equipment
Equipment (production line equipment)
Tax bracket
Immediate tax savings
True first-year cost
$300,000
37%
$111,000
$189,000
37% immediate return before operational benefits
ROI calculation
Manufacturing Machinery
Here's a critical planning point: not all states conform to federal bonus depreciation rules. States like California, New York, and Illinois have their own depreciation schedules that may not match federal benefits.
State Tax Consideration
Conforming states
Most states follow federal depreciation rules, meaning you get both federal and state tax benefits.
Non-conforming states
You receive federal benefits but may not get state tax deductions, requiring separate state tax planning.
Planning strategy
Calculate combined federal and state impact to understand true tax benefits. Even in non-conforming states, federal benefits alone often justify accelerated equipment purchases.
The combination of 100% bonus depreciation and equipment financing creates powerful cash flow advantages. When you finance equipment and receive immediate tax deductions, the tax savings can offset a significant portion of your financing costs.
Integration With Equipment Financing
Equipment Purchase
Financed at 7% over five years
37% tax bracket
$200,000
$3,960 montly payment
$74,000 immediate tax savings
$47,520
Effective first-year cost
Financing Strategy Example
$47,520 ($200,000 - $74,000 tax savings - $78,480 in payments)
Many businesses find that immediate tax savings make equipment financing more attractive than paying cash, preserving working capital while capturing tax benefits.
The 100% bonus depreciation benefit runs through December 31, 2029, creating a limited window for strategic equipment planning. This timeline allows for multi-year equipment strategies while maintaining urgency for decision-making.
Strategic planning considerations
Planning Through 2029
Prioritize highest-cost equipment purchases
2025 through 2026
Plan facility improvements and technology upgrades
2027 through 2028
Final window for maximum benefits
2029
Multi-year coordination: Businesses with ongoing equipment needs should map out a four-year acquisition strategy to maximize benefits while meeting operational requirements.
Proper documentation is crucial for claiming bonus depreciation benefits.
Documentation and Compliance
Required Records
Purchase agreements and invoices
Delivery and installation documentation
Placed-in-service certification
Equipment specifications and qualification verification
Best Practices
Work with your tax professional to establish documentation procedures
Coordinate with your financing partner on documentation requirements
Maintain detailed records for each piece of equipment
Consider professional equipment appraisals for high-value items
01
Inventory planned equipment purchases
For 2025 through 2029 and prioritize based on tax benefits
Action Steps for Business Owners
02
Calculate potential tax savings
Using your specific tax bracket and equipment costs
03
Review state tax implications
If you operate in multiple states or non-conforming states
04
Coordinate with financing partners
Who understand tax benefit integration
05
Establish documentation procedures
To ensure compliance and audit protection
The restoration of 100% bonus depreciation creates a unique window where equipment purchases deliver immediate financial returns through tax savings. Combined with other new tax law provisions like enhanced Section 179 limits and improved interest deductions, businesses have unprecedented opportunities to optimize equipment investments.
Why This Matters Now
Equipment that was previously a long-term investment now provides immediate cash flow benefits. A $100,000 equipment purchase that saves $21,000 to $37,000 in taxes fundamentally changes the ROI calculation and cash flow impact.
The Bottom Line
This isn't just about saving taxes – it's about accelerating business growth through smart, timely equipment investment. The combination of immediate tax benefits and strategic financing can transform how you think about equipment acquisition and business expansion.
Ready to explore how 100% bonus depreciation can benefit your specific equipment needs? LEAF specializes in equipment financing strategies that maximize tax benefits while providing the operational flexibility your business requires.
To discuss how LEAF can help you understand the new tax law and leverage it to move your business forward now, contact your LEAF Account Champion today.
Get in Touch
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The above is for informational purposes only and is not intended as tax or legal advice. Always check with your accountant or tax advisor to verify your eligibility for any tax deduction.
