Bonus Depreciation Returns: What It Means for LLCs and Real Estate Investors

The One Big Beautiful Bill Act (OBBBA) has reintroduced 100% bonus depreciation, providing small business owners, particularly those operating as LLCs, with a viable strategy for managing tax liability. This incentive allows eligible individuals to fully expense the cost of qualified property in the year it is placed in service, rather than depreciating it over several years.

For LLCs in industries such as real estate, construction, transportation, or manufacturing, this tax break offers a valuable opportunity to preserve cash flow, reinvest in operations, and enhance long-term financial stability. 

Key Takeaways

• The OBBBA brings back 100% bonus depreciation for qualified property.
• LLCs in the real estate, construction, and equipment industries can deduct expenses more quickly.
• Qualifying assets include machinery, vehicles, tech, and certain building upgrades.
• The OBBBA outlines when 100% applies before phase-down begins.
• Smart planning ensures maximum savings while supporting growth goals.
• Small firms can boost cash flow, cut taxes, and fund expansion with this break.

What Is Bonus Depreciation?

Bonus depreciation is a tax incentive that lets you deduct the entire purchase price of eligible assets in the year they are acquired and put into service. Traditionally, businesses and organizations would recover the cost of equipment and property improvements through regular depreciation over a set number of years.

However, with 100% bonus depreciation, businesses no longer need to wait—they can immediately expense the full cost. This speeds up deductions, reduces taxable income, and frees up cash that can be reinvested into operations or used to strengthen reserves.

The OBBBA and Its Impact on LLCs

Before the OBBBA, bonus depreciation had been phasing out, decreasing from 100% in 2022 to lower percentages in subsequent years. The new legislation reverses that decline. This move is designed to stimulate investment by lowering upfront tax liabilities for businesses.

For LLCs, the return of 100% bonus depreciation means:

• Faster Cost Recovery: Immediate deductions reduce tax burdens quickly.
• Cash Flow Flexibility: Businesses have more liquidity to fund operations or expansion.
• Tax Strategy Opportunities: LLCs can align asset purchases with years of higher income to maximize the value of deductions.

Timelines for 100% Bonus Depreciation

The OBBB restored 100% bonus depreciation, effective in tax year 2025, and made the rule a permanent part of the tax code. Qualified property purchased and placed in service after January 19, 2025, will now qualify for full bonus depreciation.

Eligible Assets Under the OBBBA

Not every purchase qualifies for 100% bonus depreciation. To take advantage of this incentive, businesses must ensure their assets fall within the eligible categories:

1. Tangible Property: Equipment, machinery, furniture, and fixtures.
2. Business Vehicles: Trucks, SUVs, and qualifying autos.
3. Technology Assets: Computers, hardware, and software.
4. Qualified Improvements (QIP): Interior upgrades to commercial property (excluding expansions, elevators, or structural work).
5. Specialized Equipment: Heavy machinery, farm tools, and manufacturing gear.

Real estate investors may find particular value in QIP deductions, which enable them to improve rental properties while immediately writing off associated costs.

Strategic Use Cases for LLCs

Real Estate Improvements

LLCs that own commercial real estate can immediately deduct the cost of interior improvements. This allows property owners to renovate rental spaces or upgrade tenant facilities without waiting years to recover costs.

Equipment-Heavy Industries

Construction firms, trucking companies, and manufacturers often rely on costly machinery and vehicles. Using bonus depreciation, these businesses can fully expense large equipment purchases in the year of acquisition.

Technology Investments

LLCs can modernize operations by investing in servers, computers, and software upgrades. Deducting these costs upfront reduces taxable income while maintaining the business’s competitiveness.

Strategic Expansion

When planning a major expansion, timing asset purchases during years of higher taxable income maximizes the deduction’s impact, lowering effective tax rates.

Planning Considerations for LLCs

While 100% bonus depreciation offers powerful advantages, it requires careful planning. 

Business owners should consider:

• Taxable Income: Accelerating deductions is best when income is high.
• Growth Plans: Time deductions with expansions to free reinvestment capital.
• State Rules: Many states don’t follow federal bonus rules, so confirm with your local authorities.
• 179 vs. Bonus: Section 179 and bonus overlap but differ; coordinate both wisely.

Exit Strategy: If selling, weigh how accelerated write-offs affect basis and gains.

Frequently Asked Questions

What is bonus depreciation?

It allows businesses to deduct the full cost of qualifying assets in the year they are placed in service. This accelerates tax savings compared to regular depreciation.

How does the OBBBA affect LLCs?

It reinstates 100% bonus depreciation, allowing LLCs to deduct major purchases immediately. This improves cash flow and reduces taxable income.

Which assets qualify for bonus depreciation?

Machinery, vehicles, technology, and certain building improvements qualify. Land and most residential property do not.

Can real estate investors benefit from this?

Yes, a qualified improvement property (QIP) made to commercial buildings qualifies. This provides a major incentive for property owners.

Does bonus depreciation apply to used assets?

Yes, as long as the asset is new to the taxpayer and meets eligibility rules. Both new and used property can qualify.

How long will 100% bonus depreciation last?

It applies from 2025 through 2027 under the OBBBA. After that, it begins to phase down until it is fully eliminated in 2032.

Is there a dollar limit on bonus depreciation?

No, unlike Section 179, there is no cap on the total deduction amount. Businesses can deduct large-scale purchases without restriction.

Do all states recognize bonus depreciation?

No, some states do not conform to federal bonus depreciation rules. Businesses must check their state tax laws.

How is bonus depreciation different from Section 179 expensing?

Section 179 has limits and requires taxable income, while bonus depreciation does not. Bonus depreciation is more flexible for larger investments.

Should LLCs accelerate purchases to take advantage?

Yes, making asset purchases during the 100% window maximizes deductions. Strategic timing can enhance long-term tax planning.

Expert Tips from NCH

1. Bundle Purchases Strategically: Consider timing major purchases together within the 100% window to maximize immediate deductions.
2. Consult on State Rules: Since not all states conform, always check local depreciation rules before planning.
3. Pair with Section 179: Coordinate Section 179 expensing with bonus depreciation for a tailored tax strategy.
4. Think Beyond Taxes: Use accelerated deductions not only for savings but also to free up cash for growth initiatives.
5. Plan for the Phase-Down: Map out purchases across multiple years to minimize the impact of declining depreciation rates.

Final Thoughts

The reintroduction of 100% bonus depreciation under the OBBBA is a game-changer for LLCs and other businesses. By deducting the cost of qualifying assets, owners can enhance cash flow, reduce taxable income, and reinvest in growth opportunities. Real estate investors, construction firms, and equipment-intensive businesses can benefit from acting within the timeline.

NCH helps business owners navigate tax laws and leverage every available advantage. Whether you’re considering property improvements, major equipment purchases, or a strategic expansion, we can help you align bonus depreciation with your long-term goals.

Call 1-800-508-1729 to start maximizing the benefits of bonus depreciation! 

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.