Retroactive 100% Bonus Depreciation Deductions for Businesses

Action: A recent letter from the Joint Committee on Taxation (JCT) estimates that the retroactive 100% bonus depreciation provision included in Public Law 119-21 (H.R. 1, 2025), also referred to as the “One Big Beautiful Bill Act” or OBBBA, will lead to approximately $16 billion in reduced Federal tax revenue for 2025.  

Trusted Insights for What’s Ahead^®

• Bonus depreciation is a tax provision that allows companies to immediately deduct some or all of the cost of new business investments, such as the purchase of manufacturing equipment, software, and furniture, rather than deducting those costs over the estimated lifetime of those assets. Specifically, 100% bonus depreciation allows companies to deduct those costs fully in the tax year in which they were incurred. The policy is designed to encourage greater domestic research and investment in capital goods.
• OBBBA restores and makes permanent full business expensing for domestic research and experimentation expenditures, new capital investments such as machinery and equipment, and interest deductibility, restoring the law in effect before the Tax Cuts and Jobs Act of 2017. Congress made this provision effective starting in tax year 2025.
• Senator Elizabeth Warren (D-MA) requested a JCT analysis of the provision of the OBBBA, particularly the retroactive application of this provision to January 19, 2025, claiming that “full bonus depreciation is likely to disproportionately benefit large corporations.”
• JCT had already estimated that the bonus depreciation provision would reduce Federal tax receipts by roughly $363 billion between fiscal years 2025 and 2034. In their response to Senator Warren’s letter, JCT also estimated that OBBBA as enacted with the retroactive 100% bonus depreciation provision reduces Federal tax receipts in 2025 by an additional $16 billion.
• There is a debate on whether making this provision retroactive truly produces this positive effect on the economy as businesses already made many before the enactment of OBBBA. Detractors view retroactivity an unnecessary tax break, while supporters contend that signals from the President and Congressional Republicans before the passage of OBBBA served as an incentive to make these investments in anticipation of enactment.
• What this means for business: Businesses should review their expensing for tax year 2025 to determine which expenses qualify for 100% bonus depreciation under OBBBA and monitor any regulatory developments at the Treasury Department related to the provision.