100% Bonus Depreciation Is Back: What Local Businesses Should Review

Tax rules have shifted again for businesses planning investments in equipment, vehicles, technology, or facilities. The  IRS says that for qualified property acquired and placed in service after Jan. 19, 2025, the bonus depreciation allowance is now 100%. That means many eligible purchases may be deducted in full in the first year, instead of being depreciated over several years.

For Chicagoland business owners, that may make capital planning more timely. But a tax deduction typically should not be the only reason to make a purchase. The bigger question is whether the asset supports a clear business need, fits your cash flow, and is ready for use within the tax year you plan to claim the deduction.

What changed with 100% bonus depreciation

Typically, businesses recover the cost of capital assets over time through tax depreciation. The  IRS explains that depreciation is the process of recovering the cost of property over a number of years, although certain rules may allow faster deductions for qualifying assets.

Under updated IRS guidance, the One, Big, Beautiful Bill provides a permanent 100% additional first-year depreciation deduction for qualified property acquired after Jan. 19, 2025. The  IRS also notes that taxpayers may generally rely on existing additional first-year depreciation regulations while official regulations are pending.

In practical terms, this may help businesses planning to invest in machinery, equipment, vehicles, furniture, technology, and other qualifying business property. Eligibility depends on the asset, business use, timing, ownership, and other tax requirements.

Timing matters: Bought is not always the same as ready

One detail business owners may want to clarify with a tax professional is the “placed in service” date. For many depreciation rules, an asset generally needs to be ready and available for its intended business use, not simply ordered or paid for. The  IRS says qualifying property acquired and placed in service after Jan. 19, 2025, may be eligible for the 100% special depreciation allowance.

That makes documentation important. Keep records showing when the asset was ordered, delivered, installed, tested, and ready for use. This may be especially important for equipment that requires setup, vehicles that need business registration, or technology that requires configuration before employees may use it.

Local businesses may need to review Illinois tax treatment

Federal tax treatment is only one part of the planning process. Illinois may treat bonus depreciation differently for state tax purposes.

The  Illinois Department of Revenue’s 2025 Form IL-4562 instructions state that Form IL-4562 is used to reverse the effects of 30%, 40%, 50%, 60%, 80%, or 100% bonus depreciation allowed by Internal Revenue Code Section 168(k) and 168(n). The department also notes in its  Illinois income tax update that for property acquired and placed in service after Jan. 19, 2025, federal bonus depreciation is 100% of the basis of the property.

For businesses in the Chicago area, this means a purchase that looks straightforward at the federal level may still require additional state-level calculations. A CPA or tax professional may help you understand how the federal deduction, Illinois addbacks, Illinois subtractions, and future depreciation schedules may affect your actual tax position.

Purchases that may deserve a closer look

The reinstated 100% deduction may be relevant for many kinds of business investments. Examples may include production equipment, commercial kitchen equipment, construction machinery, delivery vehicles, point-of-sale systems, computers, furniture, and certain improvements to nonresidential real property.

The  IRS notes that certain qualified property may include tangible property depreciated under the Modified Accelerated Cost Recovery System with a recovery period of 20 years or less, certain computer software, water utility property, and certain qualified film, television, live theatrical, and sound recording productions. Qualified property may be new property or certain used property.

Business owners may want to ask whether the purchase will improve capacity, reduce downtime, replace aging equipment, support safety or compliance, or help generate measurable revenue. If the answer is unclear, it may be worth slowing down before committing capital.

Questions to ask before making a purchase

Before making a major purchase, consider bringing these questions to your CPA, tax professional, and financial team:

• Is the asset eligible for 100% bonus depreciation?
• Will the asset be acquired and placed in service in the right tax year?
• Would Section 179 also be relevant, and how do its limits apply?
• How will Illinois tax treatment differ from federal tax treatment?
• Will the purchase create enough operational value to justify the cost?
• How will the purchase affect cash flow, working capital, and other obligations?
• Would paying cash, financing, or leasing change the tax and ownership treatment?

The goal is not just to claim a deduction. The goal is to make a business investment that typically supports your operations, your finances, and your long-term plans.

Financing considerations

Some businesses may choose to finance equipment or other business assets to preserve cash for payroll, inventory, rent, seasonal needs, or unexpected expenses. Financing may help spread payments over time while allowing a business to move forward with a needed purchase.

However, the financing structure and ownership arrangement may affect tax treatment. A loan, lease, or other arrangement may have different accounting and tax implications. Business owners should review those details with qualified tax and financial professionals before relying on an expected deduction.

The takeaway for local business owners

The return of 100% bonus depreciation may create a meaningful planning opportunity for businesses that need equipment, vehicles, technology, or other qualifying assets. But the best decisions typically start with the business case, not the tax rule.

Before you buy, confirm eligibility, document timing, review Illinois tax implications, and make sure the investment supports your cash flow and growth plans.

As you review opportunities tied to the 100% deduction, Centrust Bank may be able to help local business owners explore banking and financing options that support their next step.