Recent legislation restores 100% bonus depreciation and adds full expensing for certain qualified production property. That’s powerful—but only if you apply the rules correctly and plan around QBI, AMT, luxury-auto limits, and eligibility. Below, Key2 Accounting breaks down what changed, what qualifies, how revocations work, and where business accounting services can optimize timing, documentation, and elections. If you operate in Fort Collins, Hawaii, or anywhere in the U.S., this guide shows how coordinated CPA planning, Bookkeeping, and small business accounting workflows help you capture every allowed deduction—without tripping compliance.
TL;DR
- History & why this matters
- What 100% bonus depreciation does
- What qualifies & tricky property types
- Revoking elections, AMT, and auto limits
- New expensing for qualified production property
- Action steps & how we help
Historical Context
Bonus depreciation has been used since the early 2000s to spur investment—rising from 30% to 50% and, at times, to 100%. The TCJA made 100% first-year expensing broadly available but slated a phase-down beginning in 2023. The new law restores 100% permanently (with a short window in January 2025 at 40%) and clarifies additional areas. Our business accounting services align asset classifications and recovery periods before you file.
What 100% Bonus Depreciation Does
Claiming bonus depreciation allows an immediate deduction for the full cost of eligible assets placed in service (rather than spreading cost over years). Cash-flow impact can be significant—but planning matters. Large write-offs can reduce qualified business income and affect the Section 199A deduction. Strategic modeling through business accounting services and your CPA helps balance deductions, Bookkeeping entries, and long-term tax positions across small business accounting needs.
Qualification Criteria & Property Nuances
Generally eligible: tangible property with a MACRS recovery period of 20 years or less, certain computer software, water utility property, and qualified improvements/productions. TCJA also allowed both new and used qualifying property (with exclusions such as certain public-utility and dealer property).
Qualified improvement property (QIP): Intended for a 15-year life and bonus-eligible; earlier drafting errors were fixed by the CARES Act. Verification of asset type, placed-in-service date, and recovery period is essential—work we standardize inside our business accounting services.
Revocation, AMT, and Automobiles
- Revoking an opt-out: An election out of bonus depreciation can generally be revoked only with IRS consent, unless done on a timely filed return (then typically within six months via amendment).
- AMT alignment: Property with claimed bonus depreciation avoids separate AMT adjustments—simplifying calculations.
- Business autos: “Luxury auto” caps apply; when bonus depreciation is available, the first-year limit increases by the additional amount historically set by TCJA. Coordination with Bookkeeping, Payroll mileage/policy records, and your CPA keeps these rules straight inside small business accounting.
Issues Addressed by the Recent Reinstatement
The law extends 100% bonus depreciation for qualifying property purchased and placed in service after Jan 19, 2025 (with 40% for property placed in service Jan 1–Jan 19, 2025). Permanency improves long-range capital planning. Our business accounting services maintain fixed-asset subledgers, recovery codes, and placed-in-service documentation so deductions hold up.
New: Expensing for Qualified Production Property (QPP)
For property placed in service after July 4, 2025, certain U.S. factory builds, improvements, and specified structures can be fully expensed (100%) in year one if requirements are met, including:
- Used as an integral part of a qualified production activity;
- Placed in service in the U.S. or its possessions;
- Original use begins with the taxpayer;
- Construction begins after Jan 19, 2025 and before Jan 1, 2029;
- Proper election made on the tax return;
- Placed in service before Jan 1, 2031;
- Exclusions for office, admin, lodging, parking, sales, research, software engineering, and certain other non-production spaces.
Manufacturing machinery that doesn’t meet QPP rules may still qualify for 100% bonus depreciation. Our business accounting services and CPA team classify mixed-use facilities, carve out ineligible areas, and track recapture risks (e.g., ordinary income on disposition or use-change within 10 years). This level of control is central to compliant small business accounting.
What to Do Now
- Map your pipeline. Identify assets under contract, under construction, or slated for 2025–2026.
- Verify eligibility. Confirm recovery periods, placed-in-service dates, and QPP criteria.
- Model interactions. Test cash-flow, 199A, state add-backs, and NOL impacts with your CPA.
- Document elections. Prepare statements and workpapers; keep vendor invoices, allocation schedules, and placed-in-service proof in Bookkeeping.
- Align governance. Update capitalization policies and fixed-asset procedures within business accounting services for audit-ready support in Fort Collins, Hawaii, and nationwide.
How Key2 Accounting Helps
- Bookkeeping for fixed-asset subledgers & documentation
- Tax Preparation for bonus elections, QPP expensing, and state conformity
- CPA Services for 199A modeling, AMT checks, and entity strategy
- Accounting Consulting to design capitalization policies & project workflows
- Locations: Fort Collins, Hawaii, and nationwide!
Ready to Optimize Your Capital Plan?
Schedule a Bonus Depreciation & QPP Review.
Maximize deductions with coordinated business accounting services and CPA modeling.
