The fragile certainty of Bonus Depreciation
Acceleration works until it becomes expectation, and expectation is the one thing the Code never guarantees.
Tax incentives survive when they promise speed.
Policymakers gamble that accelerating deductions will accelerate investment. Taxpayers gamble that the rules will stay still long enough to matter.
History suggests both sides overestimate their control.
Bonus depreciation has always lived in this space. A timing tool is treated as a stimulus. A temporary fix that became a planning staple.
The latest law makes it “permanent” again, but permanence in tax policy is usually a long intermission, not an ending.
The One Big Beautiful Bill Act reinstates 100% bonus depreciation for qualifying property as of January 20, 2025.
The phase-down enacted under the 2017 tax law is gone. In principle, any qualifying asset placed in service after this date returns to full expensing.
In practice, the rules run on older machinery.
Written binding contracts continue to govern eligibility. Construction timing still fixes a project to the rules in place when meaningful work began. The new law also creates a separate category for Qualified Production Property (QPP), allowing full expensing of certain structural components tied to domestic manufacturing.
The statute preserves the trade-offs associated with the §163(j) real property trade-or-business election.
A taxpayer opting out of the interest limitation rules must use ADS for designated assets, which disallows bonus depreciation. Qualified Improvement Property sits directly in this crossfire.
The record implies a familiar pattern.
Congress wants to hand out acceleration, but it cannot escape the administrative logic of older regimes. Written binding contracts, significant work tests, ADS requirements, and related-party rules were established for temporary incentives. They remain bolted to the chassis even as lawmakers try to turn the machine into a long-term policy tool.
This creates a structural mismatch.
A “permanent” incentive requires clean lines and predictable application. Instead, taxpayers face a hybrid system: new benefits filtered through old timing rules, eligibility tests, and exceptions that reflect past attempts at anti-abuse control.
When statutes accumulate without replacement, practitioners operate in an archaeological site.
What to do?
Determine the applicable regime before performing projections. Eligibility is based on the contract date, not the placement-in-service date. A project that appears new might actually be governed by a pre-OBBA rule set.
Expect componentization to become a common strategy. Breaking assets into independently contracted parts is now a practical way to shift portions of a project completely into the 100% regime.
Treat QPP with caution. While the statute seems broad, adjacency to production is key. Office space, R&D areas, administrative zones, and non-production blocks are excluded from the accelerated class.
Reevaluate the §163(j) election each year. The trade-off between interest deductions and bonus depreciation on interior improvements is no longer theoretical. For some taxpayers, the election removes more value than it restores.
Leverage the tangible property regulations when bonus depreciation is blocked. Roof membranes, HVAC replacements, façade repairs, and other excluded items often qualify as deductions under TPR even when they fail the QIP test.
Monitor acquired property for related party traps. Used property qualifies only when the transaction resets the basis and avoids related-party restrictions.
Taxpayers want clarity. The statute offers a possibility instead.
The government writes rules that assume clean timelines. The real world supplies partially built projects, recycled contracts, and imperfect documentation. The court of public practice usually sides with whoever kept the better records.
The incentive will remain in place until lawmakers need revenue again. Guidance for QPP will drift out in pieces. TPR will continue to act as an informal relief valve.
In a few years, the same timing disputes will surface under a different label, and practitioners will revisit the same questions with fresh dates.
What is the single most critical factor a business should analyze before deciding to forego the §163(j) interest deduction election to save 100% bonus depreciation on Qualified Improvement Property?