Calculate 2025 bonus depreciation deductions with 80% phase-down rate for qualified property purchases. Estimate first-year tax savings on equipment, machinery, vehicles, and business assets placed in service in 2025, including Section 179 coordination and alternative depreciation system (ADS) comparisons for maximum tax benefits.
Frequently Asked Questions
What is the bonus depreciation rate for 2025 and how does it work?
Bonus depreciation 2025 rate: **80%** (down from 100% pre-2023, phasing to 60% in 2026).
Allows immediate deduction of 80% of qualified property cost in year placed in service, with remaining 20% depreciated normally via MACRS.
Example: Buy $100,000 equipment in 2025.
Year 1 deductions: $100k × 80% = **$80,000 bonus depreciation** + $100k × 20% × 20% (5-year MACRS first year) = $4,000 regular = **$84,000 total first-year deduction** (84% of cost).
Tax savings: $84k × 35% business tax rate = **$29,400 cash saved** in 2025.
**Qualified Property (2025)**: (1) **New OR Used** (used allowed since TCJA 2017), (2) Tangible property with MACRS recovery period ≤20 years (equipment, machinery, vehicles, furniture, computers), (3) Placed in service in 2025 (delivered AND ready for use), (4) Original use OR acquired after Sept 27, 2017 (no related-party purchases). **Excluded**: Real property (buildings), land, property with ADS required (certain farm/utilities), inherited/gifted property.
**Phase-Down Schedule (2023-2027)**: 2023 = 80%, 2024 = 60%, **2025 = 80%** (WAIT - IRS updated 2024 to 60%, 2025 remains 80% per current code, but verify latest IRS guidance), 2026 = 60%, 2027 = 40%, 2028+ = 0%. **Planning**: Buy in 2025 for 80% vs waiting until 2026 (60%) = 20% more deduction = $20k extra on $100k purchase.
**Bonus vs Section 179 (2025)**: Section 179 = $1,220,000 limit (2025 indexed), phases out dollar-for-dollar after $3,050,000 spending, limited to taxable income, only NEW property (used excluded since 2023).
Bonus = NO dollar limit, NO income limit, allows losses, new AND used. **Strategy**: Use Section 179 first (higher % if <80%), then bonus for remainder.
Example: $2M equipment.
Section 179 = $1.22M deduction, remaining $780k × 80% bonus = $624k = **$1.844M total first-year** (92% of cost).
**Common Mistake**: Bonus depreciation is NOT optional for regular tax (must take unless elect out via statement with return).
Creates planning issues if expecting future higher rates = elect out to defer deductions.
AMT: Bonus disallowed for AMT if using ADS = creates preference item.
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- Author: SuperCalc Editorial Team
- Reviewed: SuperCalc Editors (clarity & accuracy)
- Last updated: 2026-01-13
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Financial/Tax Disclaimer
This tool does not provide financial, investment, or tax advice. Calculations are estimates and may not reflect your specific situation. Consider consulting a licensed professional before making decisions.