Bonus Depreciation History and Why to Stay Cautious

The bonus depreciation rules have a long history of expansion, reduction, and reversal. That history is the strongest argument for caution when you make decisions that depend on them. This page provides a general narrative. Verify any specific date or percentage before relying on it.

Early history

Bonus depreciation began as a temporary incentive designed to encourage investment. Over the following years, Congress repeatedly enacted, extended, and modified it, at times with a lower percentage and at times with a higher one. Because it was often temporary, owners came to expect that it might expire or be extended. That pattern is a reminder that a benefit which exists today might be different tomorrow.

The 2017 change and phase-down

In general terms, legislation in late 2017 substantially increased the percentage to 100 percent for qualifying property acquired and placed in service within a specified window, and scheduled a step down in later years. Under that schedule, the percentage decreased in stages beginning in 2023. During the step-down, owners who wanted to use the higher percentages had reasons to act sooner. See Bonus Depreciation: Rules as Currently Understood (Verify) for a general table.

The 2025 change

Legislation in 2025 is generally described as restoring 100 percent bonus for qualifying property acquired after a January 2025 date and making it permanent. Permanence in tax law means only that there is no scheduled sunset. Congress can change any provision.

Why history matters for your decision

Do not depend on a single rule. If your study only makes sense with a particular bonus percentage, note that in your analysis and identify what would change if the rule changed. See Cost Versus Benefit Without Guarantees.

Timing of acquisition matters. Because the applicable percentage has been tied to dates, the timing of an acquisition or placed-in-service date has mattered a great deal in past years. Ask your preparer to identify the applicable date rule for your property.

Catch-ups follow older rules. If you are catching up on an older property, the rules that applied at the time the property was placed in service are the ones generally used. That means an owner who bought in a year with a lower percentage could have a smaller benefit from catching up than one who bought later. See Catch-Up Depreciation With Form 3115 and Used Property and Bonus Depreciation Eligibility.

Regulations and guidance

Beyond statutes, the IRS issues regulations and other guidance about bonus depreciation, including how to treat particular property and transactions. Guidance can shift how a rule applies. Court decisions can as well.

State treatment has its own history

States decide whether to follow federal bonus depreciation. Many do not, some do, and some follow partially. State positions can change independently of federal ones. See State Conformity to Federal Bonus Depreciation.

Planning under uncertainty

Consider these habits:

1. Write down the rule you are relying on and the date you checked it.
2. Model at least one case with less favorable treatment.
3. Ask whether the decision still makes sense if the deduction is spread over more years.
4. Revisit before large purchases.

What this site does and does not say

This site describes general understanding and does not claim to be current on the day you read it. The right approach is to verify. Ask your preparer to confirm the rule that applies to you and to give you a written summary.

Behavioral traps

Owners sometimes rush a purchase because a benefit is said to be expiring. Consider whether the property makes sense independent of tax. Tax rules should not drive an investment that otherwise does not fit your goals. Others delay because they are waiting for a better rule. Uncertainty is not usually resolved by waiting. See Hold Period and the Decision.

An honest summary

Bonus depreciation has been generous in some periods and limited in others, and the rules governing which period applies to your property depend on dates and facts. The safest stance is to verify and to model the case without it.

Lessons for owners from the history

One lesson is that benefits tied to specific dates reward planning but can also punish delay. Another is that expiration dates in the law can be extended, and sometimes they are not. A third is that the effective date rules can be intricate, including binding contract rules and rules for self-constructed property. A fourth is that legislation can change the treatment of property already acquired, though it usually addresses new acquisitions. The general habit that follows is to work with a preparer who tracks changes.

What to avoid

Avoid making a purchase primarily because a tax provision is expected to change, without considering the economics. Avoid assuming the current rule will last forever. Avoid relying on a summary from a source that does not say when it was written. And avoid relying on any one summary, including this one, without confirming.

Next steps

Use Bonus Depreciation: Rules as Currently Understood (Verify) for the general picture and Section 179 Versus Bonus Depreciation for the Study Decision for another deduction that sometimes interacts.