If you’ve been keeping an eye on tax policy updates, there’s a development out of the Senate worth paying attention to especially if you’re considering a major business purchase this year.
Bonus Depreciation Is Now Permanent — What the OBBBA Changed
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, permanently restored 100% bonus depreciation for qualifying business property. The phase-down schedule that had reduced the deduction to 40% in 2025 and was set to eliminate it by 2027 is gone. For property acquired and placed in service after January 19, 2025, businesses can fully expense the cost in year one — with no sunset date and no phase-out schedule.
This is one of the most significant business tax developments in years. It changes how contractors, real estate investors, and small business owners should think about equipment purchases, vehicle acquisitions, and capital investment timing.
What Qualifies for 100% Bonus Depreciation Under the OBBBA
The 100% bonus depreciation rate applies to qualified property acquired and placed in service after January 19, 2025. Qualifying property generally includes:
- Tangible personal property with a class life of 20 years or less equipment, machinery, heavy vehicles, tools, computers, and furniture
- Vehicles over 6,000 pounds GVWR (SUVs, pickup trucks, work vans) the full cost qualifies for bonus depreciation on the portion attributable to business use
- Qualified improvement property, interior improvements to nonresidential buildings
- Computer software that is depreciable
What does NOT qualify:
- Real property (buildings and structural components) remains depreciated over 27.5 or 39 years
- Land never depreciable
- Property acquired before January 20, 2025 still subject to the pre-OBBBA 40% rate
- Leased property under the new qualified production property category
Important date: Property placed in service between January 1 and January 19, 2025 falls under the old 40% rate. Property placed in service on or after January 20, 2025 gets the full 100%. For 2026 purchases, the rate is uniformly 100%.
What Does This Mean in Practice? Let’s Look at a Real-World Example
Say your company is considering purchasing an $80,000 vehicle for business use.
Scenario 1: Purchase in Cash
- The full $80,000 qualifies for bonus depreciation
- At a 37% tax rate, that’s a $29,600 tax savings in year one
- However, your business is out $80,000 in upfront cash—potentially straining working capital
Scenario 2: Finance the Vehicle Over Time
- The same $29,600 deduction still applies in year one
- Monthly loan payments allow you to conserve cash
- Preserved capital can be deployed for growth, payroll, or new contracts
The bottom line: Both options deliver the same tax savings, but only one keeps your liquidity intact.
Bonus Depreciation vs Section 179, Which Should You Use?
Both bonus depreciation and Section 179 allow immediate expensing of qualifying property, but they work differently. Under the OBBBA, Section 179 limits increased to $2.5 million for 2025, with the phase-out beginning at $4 million in total equipment purchases (indexed for inflation from 2026).
|
Bonus Depreciation |
Section 179 |
|
|
Deduction limit |
No cap |
$2.5M (2025) |
|
Can create a loss? |
Yes |
No — limited to taxable income |
|
Applies to used property? |
Yes (if new to you) |
Yes |
|
State conformity |
Varies — some states do not conform |
Most states conform |
|
Apply to listed property? |
Yes |
Yes, with limits |
Key difference for Wyoming and Utah contractors: Wyoming has no state income tax, so state conformity to bonus depreciation is irrelevant you only care about federal. Utah does have a 4.55% flat income tax, and Utah generally conforms to federal bonus depreciation rules, meaning the deduction reduces both federal and state tax liability simultaneously.
In most cases, bonus depreciation is simpler and more flexible. Section 179 is useful when you want to avoid creating a business loss or when purchasing property in a state that does not conform to bonus depreciation.
What This Means for Construction Companies in Wyoming and Utah
For construction contractors, the permanent restoration of 100% bonus depreciation is particularly impactful because the industry involves regular large equipment purchases — excavators, cranes, generators, work trucks, trailers, specialized tools, and technology systems.
A contractor purchasing $300,000 in qualifying equipment in 2026 can deduct the full $300,000 in the year of purchase. At a 37% federal tax rate, that is $111,000 in federal tax savings in year one. For a Utah-based contractor, add $13,650 in Utah state tax savings (at 4.55%) — bringing the combined first-year benefit to over $124,000.
The OBBBA also removes the December rush that used to drive year-end equipment purchases. With the deduction permanent and carrying no phase-down, contractors can align equipment purchases with operational needs and cash flow strategy rather than tax deadlines.
One important planning note: Aggressive use of bonus depreciation can create large deductions in year one and deplete future depreciation shields. If your business projects strong growth and rising taxable income in future years, a CPA should model whether front-loading deductions now or spreading them over standard MACRS schedules produces better multi-year results. The flexibility to elect 40% or 60% bonus depreciation instead of 100% is available if that better fits your tax plan.
How We Help Our Clients Make the Smart Call
At Toran Accounting, our outsourced CFO team helps companies like yours decide when and how to make capital investments that support both growth and financial stability.
Our services include:
- Real-time cash flow modeling before any large purchase
- Scenario planning to compare financing vs. cash options
- Forecasting tools that anticipate the long-term impact of each move
- Integrated tax and compliance guidance to ensure full IRS alignment
For construction and home services businesses, the margin for error on financial decisions can be narrow. We help widen that margin by bringing clarity, structure, and proactive planning to every move.
Why This Moment Matters
The permanence of bonus depreciation removes the artificial urgency we used to see each December. You no longer have to make rushed buying decisions to capture tax benefits. Instead, you can align purchases with your operational and cash flow strategy.
Our clients don’t just react to tax law changes. They use them deliberately and strategically.
This also changes how businesses should think about multi-year capital budgeting. Under the old phase-down schedule, there was pressure to buy equipment as early as possible to capture the highest deduction rate. With permanent 100% depreciation, the question shifts from “when should I buy to maximize the deduction?” to “when should I buy to maximize the business benefit?” which is a much healthier way to make capital decisions.
Thinking About a Vehicle, Equipment, or Tech Investment?
Let’s walk through the numbers together before you move forward. We’ll help you:
- Confirm eligibility for bonus depreciation
- Analyze the impact of cash vs. financing
- Ensure your books and strategy are aligned with the latest tax laws
Schedule a no-cost strategy call with our team and learn how your next purchase can support both your tax position and your bottom line.
