What the One Big Beautiful Bill Act Means for Bonus Depreciation in 2026

The One Big Beautiful Bill Act, known as the OBBBA, made 100 percent bonus depreciation permanent for qualifying property placed in service after January 19, 2025. For Massachusetts business owners who held off on equipment purchases while waiting to see where the deduction would land, the uncertainty is over. The full deduction is back, and it is not scheduled to phase down again.

This matters most for businesses that rely on machinery, vehicles, technology, or facility upgrades to operate. A large purchase can now be deducted in full in the year it is placed in service, rather than spread across several years of depreciation schedules.

What Changed Under OBBBA

• Bonus depreciation returns to 100 percent, permanently, for qualifying new and used property acquired and placed in service after January 19, 2025.
• Before OBBBA, bonus depreciation was scheduled to phase down to 40 percent in 2025 and continue dropping each year after that.
• The permanent restoration removes the guesswork around equipment purchase timing that business owners have faced since the original Tax Cuts and Jobs Act provisions began phasing out.

What Qualifies for the Deduction

• Machinery and equipment used in a trade or business
• Vehicles used for business purposes, subject to separate limits for passenger vehicles
• Off the shelf computer software
• Certain qualified improvement property, such as interior improvements to nonresidential buildings
• New manufacturing facility construction placed in service after July 4, 2025, under a related provision covering qualified production property

How This Interacts With Section 179

Bonus depreciation and Section 179 expensing work together, but they are not the same tool. Section 179 lets a business elect to expense qualifying property up to an annual limit, with a phase out that begins once total purchases cross a certain threshold. Bonus depreciation has no dollar limit and no phase out tied to total purchases.

Many Massachusetts manufacturers and distributors use Section 179 first for smaller purchases, then apply bonus depreciation to larger capital investments once the Section 179 limit is used.

What This Means for Your 2026 Planning

• If you were delaying an equipment purchase because of proposed depreciation phase downs, that concern no longer applies.
• Cash flow planning around large purchases can now account for the full deduction in the year the asset is placed in service, rather than modeling a declining bonus percentage.
• Businesses that finance equipment purchases should talk with us before year end about how purchase timing interacts with both the deduction and any loan covenant requirements.

A Word of Caution

The deduction is generous, but it should not be the only reason a business buys equipment. A purchase that does not otherwise make sense for the business rarely makes sense just because of the tax treatment. The right approach is to make the purchase decision first, based on what the business actually needs, then structure timing and financing around the tax rules once that decision is made.

What Documentation You Should Keep

Claiming bonus depreciation is straightforward on the return, but it depends on having the right records in place. This is the part that gets overlooked when a purchase happens quickly, or when a piece of equipment moves between locations or business uses partway through the year.

• The purchase invoice or contract showing the date the asset was acquired
• Documentation showing the date the asset was placed in service, which is not always the same as the purchase date
• Records showing the business use percentage for any asset that also has personal use, particularly vehicles
• Confirmation of whether the property is new or used, since both qualify but the rules for related party purchases differ

Clean documentation matters most if the return is ever questioned. It is far easier to gather this information at the time of purchase than to reconstruct it a year or two later.

Common Questions From Massachusetts Business Owners

Does bonus depreciation apply to used equipment, or only new purchases? Both qualify, as long as the property was not previously used by the taxpayer claiming the deduction and the purchase was not from a related party. This is one of the more business friendly aspects of the current rule.

What if the business does not have enough income to use the full deduction this year? Bonus depreciation can create or increase a net operating loss, which generally carries forward to offset income in future years. Whether that is the right outcome depends on the business’s specific tax position, so this is worth discussing before the purchase rather than after.

Is there a reason to still use Section 179 if bonus depreciation covers the same property at 100 percent? Yes, in some cases. Section 179 offers more flexibility, since a business can choose exactly how much to expense on an asset by asset basis, while bonus depreciation is generally all or nothing for a given class of property. The right mix depends on the business’s income for the year and what other deductions are already in play.

Where This Fits Into the Bigger Picture

The OBBBA changed more than depreciation rules. We covered the broader set of changes for business owners in our earlier look at how the OBBBA changes the game for businesses, which is worth reading alongside this article if you have not seen it yet.

Every business’s equipment purchase plan looks different depending on cash position, financing structure, and what the business actually needs going forward. If you are planning capital purchases for the rest of 2026, we would like to talk with you before you sign anything.

Our tax planning services are built around exactly this kind of decision, timed with your business, not just your return.

Ready to plan your next equipment purchase around the new rules?

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