Here is some good news if you run a construction or contractor company in Florida doing $1M to $5M in annual revenue: If you plan to buy equipment, vehicles, computers, or tools, the One Big Beautiful Bill Act (OBBBA) restored 100% bonus depreciation for most business property. That means you can deduct the full cost in the year you place the asset in service - rather than having to spread the deduction over several years. While we've had bonus depreciation previously, this was being phased out annually and is now permanent for property that fits the qualifications.

What qualifies for 100% bonus depreciation?

Most tangible personal property with a recovery period of 20 years or less. For contractors, that typically includes:

• Heavy equipment, jobsite tools, computers

• Certain vehicles that qualify

• Computers and office equipment

Timing is essential: if you signed a binding contract before Jan. 20, 2025, that property may not qualify for the new 100% rate, even if you place it in service later. Check the dates before you buy.

A quick note on vehicles

Passenger autos are still subject to the "luxury auto" depreciation caps under IRC §280F. When bonus depreciation applies, the first-year limit is increased by $8,000, and the IRS publishes the exact annual caps each year (for 2025, the first-year limit is $20,200). If you're buying work trucks, the limits differ - check with your tax preparer or accountant before purchasing any new vehicles this year.

Section 179 also got bigger (but you'll use it less)

OBBBA also increased Section 179 expensing to a $2.5M annual limit with a phase-out starting at $4M of property placed in service for 2025. Section 179 still:

• requires over 50% business use,

• can't create a loss, and

• lets you pick specific assets to expense.

Because 100% bonus depreciation is now permanent, most contractors will rely on bonus first and use 179 when they want to target specific items.

Why is this important? When you want to target full expensing under certain items, Section 179 could help more. When you elect out of bonus depreciation, you must elect out of the bonus depreciation for all assets in that class. Here's an example:

• You buy a truck for $50,000, which you don't want to take the full 100% depreciation.

• However, some heavy tools used in construction you purchased may fit in this 5-year property life, for which you DO want to take 100% depreciation.

• Section 179 may be used in this case to help out with that.

How Florida contractors (doing $1M–$5M) can put this to work

1. First, talk with your accountant or tax preparer before doing anything. You likely have specifics that apply to your situation that must be thought through.

2. Plan out what you need and how it will be paid for.

3. Consider your entity type. If you operate your business as an S Corp, something called "Basis" will need to be considered, particularly when financing equipment. You may get double-taxed and wipe out any potential tax savings if not done correctly.

Bottom line: For Florida contractors, 100% bonus depreciation is a powerful tax savings tool in 2025 and beyond. Plan your purchases, work with your accountant, and determine what's best for your business.

Don't already have an accountant or tax preparer? Feel free to schedule a call to see if we'd be a good fit for you. We specialize in helping Florida contractors, builders, and construction firms manage their accounting and optimize tax strategies.