A New Tax Break For Business Owners Could Deliver Big Savings

Core Insights - The 'One Big Beautiful Bill' introduces significant tax law changes, allowing business owners to deduct the full cost of qualified business purchases in a single tax year, enhancing potential tax refunds and reducing tax liabilities for many Americans [2][4]. Tax Deduction Changes - The bonus depreciation, previously set at 50%, was increased to 100% during the COVID-19 pandemic, but is set to phase out starting in 2023, with only 40% deductible in 2025 and elimination by 2027 [3]. - The new law makes the 100% bonus depreciation permanent for property acquired and put into service after January 19, 2025, incentivizing businesses to increase capital spending [4][5]. Impact on Businesses - The ability to deduct 100% of the purchase amount in a single year significantly lowers taxable income for business owners, creating substantial tax savings [6][7]. - This change encourages accelerated purchasing, which can lead to higher productivity and broader economic growth [4]. Practical Application - For example, a business purchasing a $25,000 vehicle in 2025 can deduct the entire cost from their taxes, contrasting with the previous requirement to spread deductions over several years [6][8]. - Taxpayers can find this deduction on Form 4562, specifically on Line 14, which pertains to special depreciation allowances for qualified property [8].