Bonus Depreciation: Potential Revival and Its Impact on Small Businesses

This week’s insight is an update to a small but important piece of the tax code that’s currently withering away: Bonus Depreciation.

Bonus Depreciation allows firms to immediately deduct a large percentage of the purchase of eligible assets rather than writing them off over time, thereby potentially reducing a business owner’s tax bill. Last week, President Trump hinted that 100% Bonus Depreciation might be in the works as part of one “big, beautiful” tax bill that’s supposedly being crafted in Congress.

Let’s take a step back, though. When the Tax Cuts and Jobs Act was passed in 2017, business owners could fully deduct qualifying purchases, including real estate improvements. Beginning in 2023, the deduction was phased down at a rate of 20% per year (the 2025 rate is 40%), but the president’s reported proposal would not only send the deduction back to 100% but might also make it retroactive. Of course, this is mainly speculation at this point, but it’s an important tax issue for entrepreneurs since it would provide accelerated, up-front tax savings.

We will know more soon, but we might not have the final numbers until sometime in the second half of 2025. As it stands, the plan being worked on in the GOP-controlled House of Representatives is moving faster than the Senate’s proposal, and Trump has voiced support for the House version. With Republicans holding a majority in both chambers, there’s a better chance of a bill passing with a retroactive 100% Bonus Depreciation carveout. For background, the provision was killed last year when Democrats controlled the Senate.

It’s estimated that making 100% Bonus Depreciation permanent would reduce tax revenue by upwards of $400 billion over 10 years, but that’s actually considered a small price to boost the health of small businesses nationwide. Another curveball is that President Trump casually mentioned last week that he’d like to abolish the IRS—toss that in the “take Trump seriously, but not literally” bucket.

There will be lots of moving pieces as the March 14 government funding deadline approaches.