For 2025, the comparison between and bonus depreciation is more complicated than in prior years because 2025 has two different bonus depreciation regimes depending on when the property was acquired. Property acquired before January 20, 2025 generally follows the phased-down bonus rules, while property acquired after January 19, 2025 generally qualifies for 100% bonus depreciation.
That means the answer to “which saves you more?” is not always the same. In some cases, is more valuable because it can be targeted asset by asset. In other cases, bonus depreciation produces the larger immediate deduction because it can fully expense the remaining basis without a dollar cap or taxable income limitation.
The key is understanding how the two provisions work together.
What does
IRC allows a taxpayer to elect to expense the cost of qualifying property in the year the property is placed in service.Under, the elected amount is deducted currently rather than recovered over time through depreciation.
For 2025, the maximum deduction is $2,500,000, and that limit begins to phase out dollar-for-dollar when total property placed in service exceeds $4,000,000.
Also has a taxable income limitation. Under, the deduction cannot exceed the taxpayer’s aggregate taxable income derived from the active conduct of a trade or business, although disallowed amounts can carry forward.
What bonus depreciation does
Bonus depreciation under is a special first-year depreciation allowance for qualified property.Unlike, bonus depreciation is not limited by taxable income and does not have an annual dollar cap.
For 2025, the applicable bonus rate depends on acquisition date:
- If the property was acquired before January 20, 2025, the 2025 bonus rate is generally 40%.
- If the property was acquired after January 19, 2025, the bonus rate is generally 100%.
The OBBBA made permanent 100% expensing for qualified business property acquired after January 19, 2025.
How they interact
The order matters.
The sources are clear that:
- Is applied first.
- Bonus depreciation is applied second.
- Regular MACRS depreciation applies to any remaining basis.
That means reduces basis before bonus depreciation is computed. If fully expenses an asset, there is no remaining basis for bonus depreciation on that asset.
What property qualifies for
Property generally includes:
- tangible property to which applies,
- certain computer software,
- property acquired by purchase for use in the active conduct of a trade or business,
- and, at the taxpayer’s election, qualified real property.
Qualified real property under includes:
- qualified improvement property, and
- certain improvements to nonresidential real property placed in service after the building was first placed in service, including roofs, HVAC, fire protection and alarm systems, and security systems.
does not apply to estates and trusts. It also generally requires that the property be acquired by purchase, and property acquired from related parties or with carryover basis generally does not qualify.
What property qualifies for bonus depreciation
Qualified property for bonus depreciation generally includes:
- MACRS property with a recovery period of 20 years or less,
- computer software depreciable under,
- water utility property,
- certain film, television, live theatrical, and sound recording productions,
- and certain specified plants.
The MACRS guide also notes that bonus depreciation generally applies to most tangible property with a recovery period of 20 years or less.
Bonus depreciation does not apply to property required to be depreciated under ADS. It also does not apply to property acquired by gift or inheritance.
The biggest practical differences
- Dollar cap
- Has a 2025 cap of $2,500,000 and phases out above $4,000,000 of qualifying property placed in service.
- Bonus depreciation has no annual dollar cap.
If you are placing a very large amount of qualifying property in service, bonus depreciation is usually more scalable.
- Taxable income limitation
- Cannot exceed taxable business income, though excess carries forward.
- Bonus depreciation is not limited by taxable income.
If your business has low or negative taxable income, bonus depreciation is often more immediately useful.
- Flexibility
- Is elective on an asset-by-asset basis and lets you specify which items and how much cost to expense.
- Bonus depreciation generally applies by class of property unless you elect out for that class.
If you want to selectively expense some assets but not others, is usually more precise.
- Real property eligibility
- Can apply to certain qualified real property, including QIP and certain nonresidential building improvements.
- Bonus depreciation generally applies to qualified property with a recovery period of 20 years or less, which can include QIP, but not most buildings.
For 2025, there is also a new special 100% depreciation allowance for qualified production property under, which applies to certain nonresidential real property used in qualified production activities and placed in service after July 4, 2025.
- SUVs
Has a special cap for certain SUVs. For 2025, the deduction limit for qualifying SUVs is $31,300 under the MACRS guide. The Code text still shows the statutory base amount of $25,000, with inflation adjustment applying.
Bonus depreciation does not use that same SUV-specific cap, although other vehicle depreciation limitations may still apply under.
When may save you more
May be more valuable in 2025 if:
- you want to target deductions to specific assets;
- you want to preserve basis in other assets for future depreciation;
- your property includes qualified real property that fits;
- you do not want bonus depreciation to apply broadly across an entire class;
- or your acquisition date puts you in the pre-January 20, 2025 40% bonus regime, making the stronger first-year accelerator.
Example: if you acquired 2025 equipment before January 20, 2025, bonus depreciation is generally only 40%. Can still expense up to the full elected amount, subject to the dollar and income limits.
When bonus depreciation may save you more
Bonus depreciation may be more valuable in 2025 if:
- the property was acquired after January 19, 2025 and qualifies for 100% bonus.
- your total qualifying purchases exceed the phaseout threshold;
- your taxable income is too low to fully use currently;
- or you want immediate expensing without regard to the dollar cap.
In those cases, bonus depreciation often produces the larger current-year deduction.
A simple 2025 comparison
If you buy $500,000 of qualifying equipment in 2025:
- If acquired before January 20, 2025, could potentially expense the full $500,000, subject to taxable income, while bonus depreciation would generally be 40% of remaining basis.
- If acquired after January 19, 2025, bonus depreciation could generally expense 100% of the remaining basis after any election.
So for post-January 19, 2025 acquisitions, bonus depreciation often matches or exceed in immediate tax savings because it can fully expense the property without the income cap.
But still matters because it lets you choose where to place the deduction first.
Recapture and downside considerations
May be recaptured if business use drops to 50% or less during the recovery period.
Bonus depreciation can also trigger ordinary income recapture on disposition to the extent of depreciation allowed or allowable.
So the “best” answer is not just about the biggest first-year deduction. It is also about whether the deduction fits the taxpayer’s income profile, asset mix, and expected holding period.
Bottom line
For 2025:
- Is usually better when you need flexibility, selective expensing, or stronger first-year deductions for pre-January 20, 2025 acquisitions.
- Bonus depreciation is usually better when the property was acquired after January 19, 2025, qualifies for 100% bonus, or when is limited by taxable income or the phaseout threshold.
