As a small business owner, maximizing tax savings is essential for maintaining a healthy bottom line. Bonus depreciation is one tool that can help you significantly reduce your taxable income by allowing you to write off a portion of certain asset costs in the year they’re placed in service.
What’s New for 2025?
In 2025, the bonus depreciation rate drops to 50%, down from 100% in previous years. While this phased reduction means less immediate savings, it still offers substantial benefits for eligible purchases.
What Qualifies for Bonus Depreciation?
Eligible assets include:
Machinery and equipment
Computers and software
Certain vehicles used for business
Improvements to non-residential property (e.g., HVAC systems, roofs)
Why It Matters
Bonus depreciation provides a valuable incentive for businesses to invest in growth. For example, if your business purchases $80,000 in qualifying equipment, you can deduct $40,000 (50%) of the cost in 2025, reducing your taxable income significantly.
How to Maximize Bonus Depreciation
Act Before the Phase-Out: The bonus depreciation rate will continue to decline in future years, so consider accelerating planned purchases to take advantage of the 50% rate in 2025.
Combine with Section 179: Use bonus depreciation alongside the Section 179 deduction for even greater tax benefits.
Consult a Tax Professional: Ensure that your purchases meet the eligibility criteria to maximize your deductions.
Example Scenario
A business purchases $120,000 in machinery for its operations. Using bonus depreciation, they can deduct $60,000 (50% of the purchase) in 2025, lowering their taxable income and freeing up capital for other investments.
Don’t Miss Out
With the reduction in bonus depreciation rates, 2025 is a pivotal year for leveraging this tax benefit. Plan your purchases wisely and take action now to maximize your savings.
Have Questions? Need help understanding how bonus depreciation applies to your business? Contact The RedHead Solutions for personalized advice and support.
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