Year-End Tax Planning: Leverage Bonus Depreciation to Minimize Tax Liability

Wallace "Trey" F. Suttle III By Wallace “Trey” Suttle, III

As the year draws to a close and your income projections become clearer, now is the ideal time to begin implementing year-end tax planning strategies to help minimize your potential tax liability.

One of the most effective strategies available is bonus depreciation. Under the Tax Cuts and Jobs Act of 2017, businesses were allowed to take 100% bonus depreciation on qualifying assets purchased between 2017 and 2022. Beginning in 2023, this benefit was gradually reduced by 20% each year, eventually phasing out entirely by 2026. During this phase-down period, many businesses turned to Section 179 expensing as an alternative. However, Section 179 has limitations on the types of assets eligible and caps on the deduction amount.

For 2025, the maximum Section 179 deduction is $2.5 million, and it begins to phase out once a business places more than $6.5 million of qualifying property in service. In contrast, bonus depreciation has no such limits or phase-outs, making it a powerful tool for larger capital investments.

New Legislation Reinstates 100% Bonus Depreciation

With the signing of the One Big Beautiful Bill Act (OBBA) on July 4, 2025, 100% bonus depreciation was reinstated for qualifying assets purchased after January 19, 2025. This change allows businesses to fully write off the cost of qualifying assets in the year of acquisition—providing a major opportunity for year-end planning.

What Assets Qualify for Bonus Depreciation?

Not all assets qualify for bonus depreciation. Eligible property includes:

Machinery and Equipment
Furniture and Fixtures
Vehicles (subject to specific limitations)
Tools
Land Improvements
Qualified Improvement Property (QIP)

Be Aware of State Conformity Rules

While 100% bonus depreciation is available at the federal level, it’s important to review how the states in which you file conform (or do not conform) to these rules. Some states disallow bonus depreciation entirely or require modifications. This can significantly impact your overall tax liability and should be factored into your planning.

Let’s Plan Ahead Together

Year-end tax planning can be complex, but you don’t have to navigate it alone. We’re here to help you evaluate your options and implement the strategies that best align with your financial goals.

Suttle & Stalnaker, PLLC is ready to help. If you would like more information on how this applies to you, contact our office at 304.343.4126.