Summary
Bonus depreciation is back. The One Big Beautiful Bill Act of 2025 (OBBBA) permanently reinstates 100% bonus depreciation for qualifying property acquired on or after January 20,2025. Assets acquired before that date generally follow the prior schedule (40% bonus deduction).
For vehicles, special depreciation limitations under IRC §280F (the “luxury auto” rules) continue to apply, even when bonus depreciation is available. Heavier SUVs and trucks with a gross vehicle weight rating (GVWR) greater than 6,000 pounds are treated differently and may qualify for enhanced deductions. Section 179 deduction remains, allowing up to $1,250,000 in 2025, subject to a $3,130,000 phase-out threshold, with a specific SUV cap of $31,300. (IRS PUB 946)
When planning major purchases, confirm the acquisition date and in-service date with your trusted professional to determine whether you qualify for 100% or 40% in 2025.
Bonus Depreciation Explained
Bonus depreciation allows an additional first-year depreciation deduction for qualified property with a recovery period of 20 years or less.
Common qualifying assets include:
- Equipment and machinery
- Computers, servers, and technology hardware
- Furniture and fixtures
- Certain building improvements
Bonus depreciation applies to both new and used property, provided the property is new to the taxpayer and meets applicable business-use requirements.
Bonus Depreciation Explained (2025 and beyond)
A) Passenger Automobiles (GVWR 6,000 pounds or less) (IRC §280F)
Passenger automobiles, including most cars, vans, and light trucks remain subject to annual depreciation caps, regardless of bonus depreciation eligibility.
- With bonus depreciation:
- Year 1: 20,200
- Year 2: $19,600
- Year 3: $11,800
- Thereafter: $7,060
- Without bonus depreciation:
- Year 1: 12,200
- Same cap applies in later years
Even when 100% bonus depreciation is available, these statutory limits cap the allowable first-year deduction for passenger vehicles.
B) Heavy SUVs/Trucks (GVWR greater than 6,000 pounds and less than 14,000 pounds)
- Not subject to the passenger “luxury automobile” caps under IRC §280F
- Section 179 for SUVs/Trucks over 6,000 pounds has a special cap of $31,300 in 2025.
- Bonus depreciation is available at 100%, with no SUV/Truck dollar cap, provided the vehicle is used more than 50% for business.
You have the ability to deduct the full cost of your business vehicle in year 1 by electing section 179 (cap of $31,300) and also electing bonus depreciation at 100% for the remaining cost after applying the section 179 cap.
Best Practices
- Keep mileage logs for vehicles
- Have written policies on vehicle use – require contemporaneous logs from employees
- Document acquisition dates- eligibility hinges on whether property was acquired before or after January 20, 2025.