Page 1: What Is Bonus Depreciation?
Bonus depreciation is a special tax rule that helps businesses save money. It lets you deduct the cost of certain property or equipment much faster than usual. Normally, you might have to wait years to write off the full cost. But with bonus depreciation, you can deduct most or all of it right away. That means you pay less in taxes in the first year.
In 2025, bonus depreciation is still available, but it’s a little different than before. It used to be 100%, which means you could deduct the entire cost of qualified assets in the year you bought them. But starting in 2023, that percentage began to go down. In 2025, it’s set at 60%. So you can still write off a big chunk of the cost right away, but not the whole thing.
This rule is really helpful for people working in manufacturing or real estate development. These kinds of businesses often buy expensive equipment or build new properties. Using bonus depreciation helps them lower costs and free up money for other projects.
Page 2: How Bonus Depreciation Helps Manufacturing and Real Estate
Let’s look at how you can take advantage of bonus depreciation on manufacturing or real estate development projects.
1. Manufacturing Equipment
If your company builds things—like cars, machines, or electronics—you need tools and equipment. These can be very expensive. Things like:
- Lathes and CNC machines
- Forklifts
- Assembly line systems
- Computers and software for managing production
When you buy these, they count as qualified property. In 2025, you can take 60% of the cost and deduct it right away using bonus depreciation. That saves you money on taxes this year and makes it easier to invest in more tools.
Example:
You buy a machine for $100,000 in 2025. With bonus depreciation, you can deduct $60,000 right away. The rest is deducted over a few more years.
2. Real Estate Development
If you build apartments, warehouses, or office buildings, you also spend a lot of money up front. The land itself doesn’t qualify, but many other things do, like:
- Heating and cooling systems
- Elevators
- Lighting
- Flooring
- Parking lots
- Landscaping
When you build a new project, you can take advantage of bonus depreciation on real estate development projects by breaking out the parts that qualify. This is called cost segregation. A tax expert can help you do this.
Example:
You spend $2 million building an apartment building. A study shows that $500,000 of that cost can be written off quickly using bonus depreciation in 2025. That gives you big tax savings now.
Page 3: Rules and Tips for Using Bonus Depreciation in 2025
If you want to take advantage of bonus depreciation on manufacturing or real estate development projects in 2025, you need to follow some rules. Here’s what to know:
1. The Property Must Be New to You
The equipment or building items must be new or “new to you.” That means they can’t be something you already owned or bought from someone related to you.
2. It Must Be Placed in Service
You can only use bonus depreciation once the asset is in use. If you buy a machine but don’t set it up until 2026, you can’t deduct it in 2025.
3. Only Certain Property Qualifies
Not everything qualifies. Bonus depreciation mostly applies to:
- Equipment (machinery, tools, furniture)
- Certain building improvements (HVAC, alarms, roofing)
- Software (if it’s not custom-made)
You can’t use it for land, buildings themselves, or anything with a useful life over 20 years unless a cost segregation study breaks out parts that do qualify.
4. Work With a Tax Pro
This is very technical, even though we’re explaining it in simple terms. A tax professional can help you get it right. They’ll know how to:
- Find qualifying assets
- Run cost segregation studies
- File the right forms with the IRS
Many developers and manufacturers miss out on savings just because they don’t know they qualify.
Final Thoughts
If you’re building, expanding, or investing in new tools, 2025 is still a great year to take advantage of bonus depreciation on manufacturing or real estate development projects. Even though it’s no longer 100%, the 60% deduction can still mean thousands—or even millions—in tax savings.
Use this opportunity to grow smarter. Whether you’re buying machines for your factory or building new apartments, knowing how bonus depreciation works gives you a big advantage.
Remember, to take advantage of bonus depreciation on manufacturing or real estate development projects, you must plan early, track your spending, and work closely with your accountant. Don’t wait until tax season—start now.
