As the dust settles from Congress’s latest debates over funding the government through March, many business owners, tax professionals, and commercial property investors are left wondering if 100% bonus depreciation will be reinstated for the first year of asset use. The phase-down of bonus depreciation, as set in motion by the Tax Cuts and Jobs Act (TCJA) of 2017, has reduced the deduction from 100% in 2022 to 60% in 2024 and 40% in 2025, with further reductions planned annually until it phases out entirely by 2027.
However, recent discussions in Washington signal that this could change.
What is Bonus Depreciation and Why Does it Matter?
Bonus depreciation allows businesses to immediately deduct a significant portion of the cost of qualifying assets in the year they are placed in service. This incentive spurs investment in property, equipment, and other business assets by providing upfront tax savings. For commercial property owners, it has been especially impactful when paired with cost segregation studies, which reallocate building costs to shorter-lived asset classes to maximize depreciation benefits.
The move to phase out 100% bonus depreciation was intended to offset the budgetary impact of the TCJA’s tax cuts. However, the economic landscape has shifted since 2017, with inflationary pressures and rising interest rates creating challenges for businesses. Policymakers have signaled interest in revisiting this provision as part of broader efforts to stimulate the economy.
Current Congressional Climate
Recent Congressional discussions on extending government funding through March 2025 revealed a divide on fiscal priorities, including the role of tax incentives. While no direct proposal to reinstate 100% bonus depreciation has emerged, there is growing momentum among both parties to reevaluate tax policies that encourage capital investment. Republican lawmakers and business advocacy groups argue that reinstating 100% bonus depreciation could drive economic growth by incentivizing business expansion and creating jobs.
Democratic lawmakers, meanwhile, have been cautious about tax cuts perceived as benefiting corporations disproportionately. However, some Democrats have signaled willingness to negotiate, especially if paired with measures to support small businesses or address social spending priorities.
This sets the stage for potential bipartisan compromises that could include a temporary reinstatement of 100% bonus depreciation.
Predictions for 2025
Given the contentious nature of budget negotiations, it’s unlikely that 100% bonus depreciation will be reinstated unilaterally. However, a targeted reinstatement tied to specific economic goals, or a temporary extension could gain traction. For example, Congress might restore the deduction to 100% for assets placed in service during 2025 to provide businesses with immediate relief amid ongoing economic uncertainty.
Alternatively, any changes to bonus depreciation could become part of a broader tax reform package rather than a standalone measure. With the presidential election decided, both parties may seek to position themselves as champions of pro-growth policies, increasing the likelihood of tax incentives like bonus depreciation becoming part of the conversation.
What Should Commercial Property Owners and Businesses Do?
While the future of bonus depreciation remains uncertain, commercial property owners and businesses should prepare by consulting tax professionals to maximize existing benefits. Cost segregation studies, combined with current bonus depreciation levels, still provide significant tax savings.
As we approach the March deadline for government funding and further budget discussions, the possibility of 100% bonus depreciation making a comeback is not off the table. Whether it’s reinstated temporarily or becomes part of a broader tax policy overhaul, the months ahead will provide greater clarity for businesses looking to plan their investments strategically.
With over 45,000 completed studies nationwide, CSSI stands ready to help you optimize your tax strategy under current and future tax policies. Contact us to learn how these proposed changes could benefit your business.