Bonus depreciation has long been a powerful tax incentive for Lease-Here, Pay-Here dealers. Here’s a quick look at how it worked under the Tax Cuts and Jobs Act (TCJA) — and what’s proposed in the new “One Big Beautiful Bill” (OBBB).
In 2018, the Tax Cut and Jobs Act gave LHPH dealers the opportunity to use bonus depreciation, the ability to depreciate 100% of used vehicle assets originated between 2018 and 2023. After 2023 the 100% bonus depreciation will decrease 20% per year bringing bonus depreciation to 60% in 2025.
The “One Big Beautiful Bill,” passed by the House and under consideration by the Senate, proposes to bring back 100% bonus depreciation for assets placed in service between January 20, 2025, and December 31, 2029.
Unlike the TCJA, the OBBB does not include a tiered phase-out. Instead, the 100% deduction would remain in place through 2029, then drop off entirely beginning in 2030 unless extended by future legislation.
For independent and franchise auto dealers with leasing programs, the proposed return of 100% bonus depreciation presents a major opportunity for your dealership.
Be sure to engage your CPA or tax advisor early to evaluate your plans and ensure you’re positioned to take full advantage of these incentives before they expire. Smart planning today can help you maximize your savings and keep your dealership on the road to growth.