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Headshot/title of SME: Carey Sanders, senior vice president and senior commercial banker for Fifth Third Bank (Cincinnati)

How Companies Can Take Advantage of New Equipment Deduction Rules

The One Big Beautiful Bill Act restores 100% bonus depreciation for certain business assets.

Passed in summer 2025, the One Big Beautiful Bill Act (OBBBA) reinstated 100% bonus depreciation for assets placed in service after January 19, 2025, and made the rule permanent.

This creates significant tax planning opportunities for businesses of all sizes: invest $10 million in an industrial robot, and you can now reduce your company’s taxable income for the year by that full amount.

How bonus depreciation works

Normally assets like machinery, vehicles and furniture must be depreciated over several years. Bonus depreciation accelerates this process, allowing businesses to deduct all or part of the purchase price in the year the asset is placed in service.

Under the OBBBA, the rule applies to qualifying assets with a recovery period of 20 years or less. Permanency simplifies planning and eliminates multi-year tracking.

Strategies to maximize benefits

Beyond purchasing equipment, there are several ways to take advantage of the new rules. Leasing and hybrid financing can unlock additional advantages:

• Tax lease: In this arrangement, the lessor (often a bank) owns the equipment and claims the depreciation benefit, passing savings to the lessee through lower payments. This is ideal for companies with limited taxable income or assets that quickly become obsolete, such as medical or IT equipment.
• Fair Market Value (FMV) Lease: To acquire these assets, a business can take advantage of a fair market value lease. “This provides options at the end of the lease to purchase the equipment for fair market value, extend the equipment while a decision is being made or return the equipment,” John Drake, national sales manager, Fifth Third Technology Finance, says. “Often the plan is to return the equipment and replace it with new to avoid technical obsolescence or an increase in maintenance costs.” The financial benefits of a lease arrangement can be considerable.
• Hybrid approach: Financing part of the purchase with debt while leasing the remainder can balance tax benefits with cash flow needs. This strategy helps avoid large net operating losses and provides flexibility for future investments.

Companies should also consider how bonus depreciation interacts with other provisions, such as changes to business interest deductions, which now use an EBITDA-based formula.

Planning ahead

The reinstatement of 100% bonus depreciation offers a powerful incentive for capital investment. Whether through purchasing, leasing or financing, businesses can use these rules to improve cash flow and support growth strategies. Consult your tax advisor to determine the best approach for your circumstances.

To learn more, contact Carey Sanders, senior vice president and senior commercial banker for Fifth Third Bank (Cincinnati) .

This content is for informational purposes only and may have been derived, with permission, from a third party. While we believe it to be accurate as of the date of publication, it does not constitute the rendering of legal, accounting, tax, or investment advice or other professional services by Fifth Third Bank, National Association or any of its subsidiaries or affiliates, and it is being provided without any warranty whatsoever. Please consult with appropriate professionals related to your individual circumstances. Deposit and credit products provided by Fifth Third Bank, National Association. Member FDIC.