Commercial Insights

One Big Beautiful Bill Act: Breaking down bonus depreciation

Capital expenditures set to boom with passing of the new law.

The One Big Beautiful Bill Act (OBBBA) is now law and while consumers and businesses alike try to digest the changes it brings, there is one standout that is immediately resonating with businesses – large and small. Bonus depreciation.

“The new law reinstates and makes permanent 100% depreciation allowing businesses to immediately deduct the full cost of qualified property purchased on or after January 20, 2025,” says Courtney Jeans, head of Regions Equipment Finance. “This includes tangible personal property with a recovery period of 20 years or less. It also includes qualified production property, which is nonresidential real property used in manufacturing, production, or refining of tangible personal property, as long as construction starts after December 31, 2024, and it is placed into service before January 1, 2034.”

This is a notable change from the Tax Cuts and Jobs Act of 2017 (TCJA) rules around bonus depreciation which for 2025 had allowed for a taxpayer to deduct a percentage of the cost of qualified property, in the year it’s acquired and placed in service. In the case of property placed in service in 2025, that depreciation was 40%. Had the TCJA been allowed to expire at the end of 2025, the law would have reverted to 20% bonus depreciation for qualified property placed in service in 2026.

“This isn’t the first time that bonus depreciation has been reinstated to 100% - it is the significant incentive for companies across all sectors, industries, and geographies to maximize taxable savings which should be a well-disciplined and controllable expense,” notes Jeans. “Reinstatement of 100% depreciation will bolster and electrify the 3rd and 4th quarter as companies move ahead with capital expenditures (Capex) they may have been holding in anticipation of this law passing.”

Small businesses will benefit from these changes, as well notes Alan Register, who leads Ascentium Capital, a division of Regions serving the equipment financing needs of small businesses. “The ability to fully deduct the cost of equipment through the OBBBA’s 100% depreciation allowance is a significant benefit for small businesses as they can now accelerate their tax savings versus the prior method of accounting for this deprecation and its associated tax benefits over several years,” notes Register. “The cash flow impact is immediate, helping these entities cost-justify purchases.”

Jeans and his team at Regions Equipment Finance are working with CEOs and CFOs across the Bank’s footprint regarding how they will maximize their remaining Capex in 2025 and deploying unique strategies related to the 100% depreciation benefits.

This is where bringing your bank into your Capex decision making strategy can identify and implement multiple tax saving strategies. This results in a win-win for both parties, the client and financial institution. The financial institution receives the tax benefit of depreciation and passes this benefit through to the client in the form of lower payments, thus preserving cash. This allows clients to retain use and production of the equipment while maximizing tax efficiencies. Having a solid understanding of ways to maximize tax efficiencies is exponentially more beneficial than focusing on interest rates alone.

“The client may not be able to utilize all of the available depreciation,” notes Jeans. “The question becomes: where is the strategic breakeven point to maximize taxable benefits and where do I want to offlay that to my financial institution to preserve cash and mitigate a potential net operating loss scenario.”

To learn more about Regions Equipment Finance visit: https://www.regions.com/commercial-banking/commercial-lending/equipment-finance

Connect with a Regions Equipment Finance banker today.