Accelerate Your Tax Savings: What Business Owners Need to Know About Bonus Depreciation

Buy it this year. Deduct it this year. Bonus depreciation can give your tax bill a serious haircut—if you use it wisely.

If you’ve made big purchases for your business—equipment, machinery, vehicles, furniture—you might be able to write off the entire cost right away instead of depreciating it over several years. That’s the power of bonus depreciation.

But before you go on a buying spree thinking the IRS is footing the bill, let’s walk through how it actually works—and when it doesn’t make sense to use.

What Bonus Depreciation Is (And Why It Exists)

In the usual world of depreciation, you deduct a little bit of an asset’s value every year based on how long it's expected to last. So if you buy a $50,000 machine that lasts five years, you'd deduct $10,000 per year.

Bonus depreciation lets you skip the slow-drip deduction and take 100% of the deduction in the first year.

This strategy was supercharged under the Tax Cuts and Jobs Act, which temporarily allowed businesses to claim full bonus depreciation on qualified property—that includes tangible business assets like machinery, furniture, tech equipment, and certain vehicles.

For assets placed in service during 2024, you can still get bonus depreciation, although the percentage is phasing down from its 100% peak. (It drops to 60% in 2024, then continues decreasing unless new legislation extends it.)

Why Bonus Depreciation Matters

When used strategically, bonus depreciation can:

• Lower your taxable income substantially in the year of purchase
• Improve cash flow by freeing up capital you’d otherwise send to the IRS
• Make large capital investments more affordable when timed well
  
  

It’s especially useful in high-income years or when making investments in assets that you’ll use for years to come.

But—if your business isn’t generating a lot of income this year, or you expect to be in a higher tax bracket in the future, you might be better off using standard depreciation to spread out deductions over multiple years.

A Word on Vehicles (Because Everyone Asks)

Yes, you can use bonus depreciation on business vehicles—but there’s fine print. Here’s the quick breakdown:

• Vehicles under 6,000 lbs. (like sedans or smaller SUVs) fall under Section 280F “luxury auto limits,” which cap your depreciation significantly.
• Vehicles over 6,000 lbs.—think large SUVs or trucks—aren’t capped, which makes them bonus depreciation–friendly if they’re used more than 50% for business.
  
  

Just make sure you’re documenting business use properly. The IRS loves vehicle audits.

Don’t Guess. Get It Right.

Bonus depreciation sounds like a no-brainer, but it’s not one-size-fits-all. Timing, income levels, and future planning all factor into whether you should accelerate the deduction or spread it out.

Ready to Accelerate Your Tax Savings?

If you're considering a major business purchase—or already made one—we’ll help you decide whether bonus depreciation is the smart move. We'll walk you through the timing, phaseouts, and how to make it work within your broader tax strategy.

 

Schedule a consultation with SHI INCORPORATED today and let’s make sure your next business investment works for you at tax time.