If you’re a San Diego business owner looking to reduce taxes before year-end, bonus depreciation might be one of the best tools available. It’s a simple but powerful way to accelerate deductions, boost cash flow, and keep more money in your pocket — right when you need it most.
What Is Bonus Depreciation?
Bonus depreciation lets you deduct up to 100% of the cost of qualifying business assets in the year you place them in service — instead of spreading the deduction over several years.
Think of it as an instant tax write-off for big purchases that help your business grow — things like:
- Equipment, machinery, tools, and computers
- Office furniture and fixtures
- Qualified software
- Certain building improvements
For example, if you buy $100,000 worth of equipment in December and start using it right away, you could deduct the full $100,000 this year. At a 30% tax rate, that’s roughly $30,000 in tax savings — cash that stays in your business.
Why It Matters
Here’s why bonus depreciation is a favorite among business owners:
✅ Immediate tax savings. Lower taxable income = smaller tax bill.
✅ Cash-flow boost. Use the money you save to reinvest in growth, pay down debt, or upgrade operations.
✅ Flexible for new and used assets. As long as the property is new to you and placed in service during the tax year, it likely qualifies.
✅ No annual cap. Unlike Section 179, there’s no maximum deduction limit for most businesses.
What’s Changing in 2025
Bonus depreciation was originally 100%, but it started phasing out after 2022.
Under the One Big Beautiful Bill (OBBB) signed in mid-2025, 100% bonus depreciation has been reinstated permanently for qualified property placed in service after January 19, 2025.
That means if you’re planning to invest in new equipment, software, or renovations — doing it before year-end could let you deduct the full cost on your 2025 taxes.
How to Use It Strategically
Here’s how to make bonus depreciation work for you:
- Time your purchases. Assets must be placed in service before year-end to qualify. Buying something and letting it sit in storage doesn’t count.
- Coordinate with other deductions. Compare bonus depreciation vs. Section 179 — both accelerate write-offs but have different limits and rules.
- Plan around income. If your business is having a strong year, bonus depreciation can offset profits and cut your tax bill dramatically.
- Consider future years. If you expect higher income later, you may want to spread deductions out instead of taking everything now.
- Keep good records. Track invoices, service dates, and purchase details — the IRS requires clear documentation.
Real-World Example
Let’s say your construction company spends $250,000 on a new work truck and tools in 2025.
With 100% bonus depreciation, you can deduct the entire $250,000 in the same year.
At a combined tax rate of 32%, that’s about $80,000 in tax savings — real money you can put toward payroll, marketing, or more equipment.
Who Benefits Most
Bonus depreciation works great for:
- Construction and trades (equipment, tools, vehicles)
- Restaurants and hospitality (kitchen or bar upgrades)
- Health & wellness businesses (furniture, fitness machines, technology)
- Professional services (computers, office renovations, software systems)
Basically, if you buy assets that help you run or grow your business — this applies to you.
Quick Tax Tip
Combine bonus depreciation with smart year-end planning:
- Prepay certain expenses (like insurance or rent).
- Delay invoicing until January if you want to push income into next year.
- Max out retirement contributions.
- And if you’re investing in new equipment — make sure it’s in use before December 31.
Final Thoughts
Bonus depreciation is one of the easiest ways to save thousands in taxes and strengthen your cash flow — but only if you plan correctly.
At Accounting Fresh, we help construction, service-based, and local San Diego businesses build customized year-end tax strategies that make every dollar work harder.
Want to see how much you could save this year?
Let’s review your asset purchases and map out your 2025 tax strategy before the deadline hits.