Every December, I see the same thing happen. A manufacturer calls, slightly panicked, saying:
“Chris, I just ordered three new CNC machines — can I write them off this year?”
And I always laugh before I answer. Because by December, it’s usually too late. Unless the truck shows up, you install it, place it into service prior to December 31st… you’re toast. The expense might be available — but the tax break won’t.
Let’s talk about why 2025 is such a critical year for bonus depreciation. And, why, this time, timing truly is everything.
What Changed (and Why You Should Care)
For years, bonus depreciation has been the go-to move for manufacturers who want to expense the cost of new equipment in the first year. It’s one of the most generous deductions in the tax code — but like a Vegas buffet, the portions have been shrinking.
Under the old schedule, businesses could deduct 80% of qualifying assets in 2023, 60% in 2024, and 40% in 2025, before phasing out completely by 2027.
But then came the twist — Congress passed the One Big Beautiful Bill Act in 2025, bringing back 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025.
That means if you bought and installed equipment after January 20th, congratulations — you’re back in 100% deduction territory. But if you placed it in service before that date, you’re stuck at 40%.
Yes, you read that right — a single weekend could be worth hundreds of thousands in deductions. Timing has never been so literal.
What Qualifies (and What Absolutely Doesn’t)
Now, let’s clear up one of the biggest misconceptions I hear: not everything with a serial number qualifies. Bonus depreciation applies to tangible personal property with a recovery period of 20 years or less.
In plain English: that means machinery, equipment, and production assets — not your land, not your inventory, and not your office furniture.
So if you’re a manufacturer, think about the heavy hitters: robotic arms, injection molding equipment, conveyor systems, or quality control machines. Even your clean-room HVAC might qualify. As long as it’s tied directly to production and not just keeping the accounting team comfortable. I mean… do they really need A/C in Florida during the summer months (or even really)?
But there’s always a trapdoor. I once had a client try to claim bonus depreciation on a new roof because “it keeps the machines dry.” Nice try — but roofs, walls, and parking lots are off-limits. Those fall under standard depreciation, which moves slower than an IRS refund check in February.
Used equipment can also qualify, but only if it’s “new to you.” You can’t sell it to yourself and expect the IRS to applaud your creativity. But, nice try… I thought of the same thing when the OBBBA came out. Unfortunately, others have already tried and there are provisions against this.
Placed in Service: The Tax World’s Favorite Phrase
Here’s where I see many businesses trip up. The IRS doesn’t care when you order the equipment or when it’s delivered. It only cares when it’s ready for use — that’s the “placed in service” date.
So if your $1.2 million assembly line arrives in November but doesn’t pass inspection until February. Sorry, this is now a 2026 deduction. Nothing can be claimed in 2025. And with supply chains still slower than government websites, that delay can cost you serious money.
I’ve had clients miss deadlines by a week because a single component got held up in customs. The moral: plan early, install early, and don’t count on overnight shipping to save your tax strategy.
How to Claim It (Without Claiming a Headache)
The mechanics are simple but unforgiving. You’ll claim bonus depreciation on IRS Form 4562 — and this is where mistakes happen. One wrong classification and your shiny new equipment could be treated like a 39-year-old warehouse.
Most manufacturers pair bonus depreciation with Section 179 expensing. Here’s how it works: you take Section 179 first — up to the annual limit of $2.5 million — and then apply bonus depreciation on the rest. That one-two punch can turn a major equipment upgrade into an immediate tax win.
The difference? Section 179 is elective and limited by your taxable income. Bonus depreciation isn’t. You can actually use it to generate a loss, which is incredibly useful if you’re planning future profits or want to carry forward deductions.
Cost Segregation: The Secret Weapon
If you own your facility, there’s another play — a cost segregation study. Think of it as an X-ray for your building. Instead of depreciating the whole property over 39 years, you break out pieces like lighting, electrical systems, and specialized flooring that can be written off much faster.
I had a client in Tampa who bought a $4.8 million plant. After a proper study, about 30% of that facility was reclassified into 5-, 7-, and 15-year property. With bonus depreciation layered on, they wrote off a huge chunk of the building against their other income in the first year. That’s not creative accounting — that’s strategic engineering.
When You Should Not Take Bonus Depreciation
Yes, you read that right. Sometimes the best tax strategy is to skip the shiny deduction.
If your company’s profits are low or you’re in an NOL (net operating loss) position, taking all your deductions at once might not help. You could be wiping out income you don’t have — and wasting future opportunities.
In that case, I sometimes advise clients to opt out of bonus depreciation for certain asset classes. That way, you save those deductions for a year when they’ll do more good. It’s like storing ammo for a more profitable tax battle.
And don’t forget — states don’t always play by the federal rules. States like Florida, Texas, and Tennessee have relatively friendly tax environments, but if you’re manufacturing across state lines, you need to check conformity laws carefully. Some states love bonus depreciation. Others act like it never existed.
The Audit-Proof Approach
Here’s the truth: the IRS loves auditing depreciation schedules.
Why? Because they’re technical and easy to mess up.
If you want to keep your deduction (and your sanity) keep everything documented. Purchase invoices, installation logs, and commissioning reports should be ready to go. For equipment installed in phases, note each placed-in-service date. The cleaner your records, the faster the IRS moves on to someone else.
One client once told me, “Chris, the IRS sent me a letter about my depreciation.” I told him not to worry. We had every document lined up like ducks in a row. The agent thanked us for the organized file (yes, that actually happened) and closed the inquiry in 10 minutes.
The Bottom Line
If you’re a manufacturer planning to buy new equipment, 2025 is your year. The return of 100% bonus depreciation is truly a gift — but only if you act fast and plan right. The window opened January 20, 2025, and no one knows how long it’ll stay that generous. Oh, did I mention you have to buy and put the equipment into service prior to December 31st for it to count this year?
Buy smart. Install early. Document everything. And before you start writing checks, talk to a tax strategist who lives and breathes this stuff — someone who can turn timing into savings and compliance into confidence.
Welcome to the New Age of Accounting. Let’s begin.
P.S. If you found this article helpful, you’ll love my new book S-Corp Mastery: How Smart Business Owners Maximize Tax Savings & Build a Lasting Legacy. It’s now live and available in a sleek, easy-to-read PDF version. Grab your copy here
Chris is the Managing Partner at Weston Tax Associates, a best-selling author, and a renowned tax strategist. With over 20 years of expertise in tax and corporate finance, he simplifies complex tax concepts into actionable strategies that drive business growth. Originally from Sweden, he now lives in Florida with his wife and two sons.
