Knowables – Key Market Aspects - 07.23.2025

The White House's "One Big Beautiful Bill," signed into law in July 2025, introduces changes to U.S. tax policy, particularly benefiting middle and working-class Americans. Look for our next Controllables memo to learn where opportunities may be created or enhanced by this new tax bill.

Permanent Tax Cuts: Extends and makes permanent the individual tax rate reductions from the 2017 Tax Cuts and Jobs Act (TCJA).

The enhanced deductibility for capital expenditures in the form of bonus depreciation will have the greatest impact on some of our clients.  Here is a more detailed breakdown of “bonus depreciation”:

The enhanced deductibility for capital expenditures through bonus depreciation, especially under the 2025 "One Big Beautiful Bill", has had a significant impact on business investment and tax planning.

Bonus depreciation allows businesses to deduct a large portion, or even the full cost, of qualifying capital assets (like machinery, equipment, or software) in the year the asset is placed in service, rather than spreading the deduction over several years.

• 100% bonus depreciation (also called full expensing) means the entire cost is immediately deductible.

• 80% bonus depreciation (as seen in 2023) allowed 80% of the cost to be deducted upfront, with the rest depreciated over time.

Impact of Enhanced Bonus Depreciation

• Improved Cash Flow: Businesses can reduce taxable income significantly in the year of purchase, freeing up cash for reinvestment.

• Incentivized Investment: Encourages companies to invest in new equipment, technology, and infrastructure.

• Tax Planning Flexibility: Offers strategic advantages in managing taxable income across years.

Those who benefit the most include:

Large Corporations:

• Especially capital-intensive industries like manufacturing, transportation, and tech.

• Example: Just 25 large U.S. corporations saved nearly $67 billion from 2018–2022 due to accelerated depreciation [1].

Small and Medium-Sized Businesses (SMBs):

• LLCs, S-Corps, and sole proprietors also benefit, especially those making significant equipment purchases.

• Bonus depreciation can be combined with Section 179 expensing for even greater tax savings.

Real Estate Investors:

• Through cost segregation, they can accelerate depreciation on building components (e.g., HVAC, lighting), maximizing deductions.

Startups and Growth Companies:

• Immediate deductions help offset early-stage income, improving the runway and reinvestment potential.