100% bonus depreciation is back — permanently. The 2025 federal tax law reversed the phase-down and restored full first-year expensing for business equipment, vehicles, and building improvements. For Frederick County business owners planning purchases, the rules just got dramatically better. But there are traps — including one that's specific to Maryland.
Bonus depreciation lets a business deduct the full cost of qualifying property in the year it's placed in service, instead of depreciating it over several years. Under the 2017 tax law, the benefit was temporary and had been phasing out — 80% in 2023, 60% in 2024, headed for zero. Business owners spent two years making purchase decisions around a shrinking deduction.
The One Big Beautiful Bill Act, signed July 4, 2025, ended the phase-down: 100% bonus depreciation is restored and made permanent for qualifying property acquired and placed in service after January 19, 2025.
| When Property Was Acquired / Placed in Service | Bonus Depreciation Rate |
|---|---|
| 2023 | 80% |
| 2024 | 60% |
| Acquired on or before January 19, 2025 (old rules) | 40% |
| Acquired and placed in service after January 19, 2025 | 100% — permanent |
The acquisition-date cutoff matters for anything purchased around the transition: a binding purchase contract signed before January 20, 2025 can leave equipment stuck at the old 40% rate even if it was delivered later. If you bought equipment in early 2025, the dates on your contract deserve a close look.
Bonus depreciation applies to most tangible business property with a recovery period of 20 years or less, including:
Used equipment qualifies too. Unlike the pre-2017 rules, bonus depreciation applies to used property as long as it's new to you and wasn't acquired from a related party. For contractors and truckers buying used machinery and tractors, this is a major benefit.
What doesn't qualify: the building itself (39-year commercial / 27.5-year residential rental property), land, and property used predominantly outside a trade or business.
The 2025 law also raised the Section 179 expensing limit to $2.5 million (phasing out above $4 million of purchases, both indexed). With both tools at full strength, the practical question is which to use:
| Section 179 | 100% Bonus Depreciation | |
|---|---|---|
| Annual limit | $2.5 million (indexed), phaseout above $4M in purchases | No dollar limit |
| Can it create a loss? | No — limited to business income; excess carries forward | Yes — can create or increase a net operating loss |
| How it's applied | Elected asset by asset — pick and choose | Automatic by asset class unless you elect out of the whole class |
| Maryland treatment | Generally conforms — same deduction on the Maryland return | Decoupled — Maryland requires an addback |
That last row is the one out-of-state guides never mention — and for Maryland businesses it often decides the question.
Maryland decouples from bonus depreciation. Bonus claimed on your federal return must be added back on your Maryland return (via the decoupling modification), with the asset depreciated for Maryland purposes over its regular schedule. Section 179, by contrast, generally flows through to Maryland intact. For many Frederick County businesses, using Section 179 first — and bonus only for what exceeds the 179 limits or income limitation — keeps the federal and Maryland returns aligned and avoids years of tracking two depreciation schedules. This is a Maryland-specific strategy call, made purchase by purchase.
Vehicle depreciation has its own rulebook, and the weight of the vehicle drives the outcome:
100% expensing is powerful — and reflexively taking it every time is a mistake. Reasons to elect out (or use regular depreciation) in a given year:
The election out of bonus depreciation is made by asset class on a timely filed return — and it's essentially irrevocable once the filing deadline passes. That means the "take it or spread it" decision has to be made deliberately at filing time, with next year's income in view. It's one of the clearest examples of why tax planning happens before December 31 and before the return is filed, not after.
The deduction lands in the year the asset is placed in service — ready and available for use — not the year you ordered or paid for it. A skid steer ordered in November but delivered in January belongs to next year. For year-end planning, that means delivery and setup dates matter as much as the purchase order, and for big-ticket items with long lead times, the planning conversation needs to happen months ahead.
Who benefits most from the restored 100% rate in Frederick County: contractors and landscapers buying machinery and trucks, farmers replacing equipment (tractors and most farm machinery qualify, and used equipment counts), restaurants renovating dining rooms under the QIP rules, medical and dental practices investing in imaging and clinical equipment, and trucking operations — where tractors are already 3-year property and bonus accelerates even that.
How we handle this for clients: before any major purchase, we model bonus vs. Section 179 vs. regular depreciation across both the federal and Maryland returns, factor in the QBI and loan-term effects, and time the placed-in-service date against your income. It's a fifteen-minute conversation that routinely swings thousands of dollars. Our tax planning services build this into every equipment-heavy client's year.
We'll model bonus depreciation, Section 179, and the Maryland addback against your actual income — before you sign — so the write-off lands where it does the most good. Call (301) 662-6992.
Book a ConsultationYes — as long as the property is new to your business and wasn't acquired from a related party, used equipment gets the same 100% first-year treatment as new. For contractors, farmers, and truckers buying used machinery, this levels the playing field between new and used purchases.
If it's over 6,000 pounds GVWR and used predominantly for business — very likely yes, on the business-use percentage, under bonus depreciation. Under that weight, the luxury auto caps limit the first-year deduction regardless of the sticker price. The GVWR is on the door jamb sticker; check it before you buy, not after.
Because Maryland decouples from bonus depreciation — the federal write-off is added back on the Maryland return and the asset depreciates for Maryland over its normal schedule. Your Maryland income runs higher in year one and lower in later years until the two catch up. Using Section 179 instead, where possible, avoids the split entirely.
Often, yes — interior improvements to a nonresidential building generally qualify as Qualified Improvement Property, which is 15-year property eligible for 100% bonus. Structural work, enlargements, and elevators don't qualify, and the building shell itself never does — so a renovation usually splits between bonus-eligible QIP and long-life building property. A cost segregation of the project maximizes the eligible portion.
By Roy Cogliandolo, CPA · Mercer Flanagan · March 3, 2026
This article is general information, not tax or legal advice. Depreciation rules, limits, and Maryland conformity change — verify current-year treatment for your specific purchase with a qualified professional before acting.