One Week Until the Tax Deadline: Last-Minute Depreciation Moves to Consider

With only one week remaining before the tax filing deadline, now is the time to take advantage of last-minute tax-saving strategies for your 2025 return. While many options must be implemented before the end of the tax year, several depreciation strategies can still be applied in 2026 to affect your 2025 tax return.

If you purchased or placed business assets into service in 2025, your approach to deducting those costs can significantly affect your tax bill.

Quick Refresher: How Depreciation Works

Most business assets with a useful life of more than one year must be deducted gradually, rather than all at once. The IRS assigns recovery periods ranging from 3 years for certain tools and software up to 39 years for commercial real estate.

Tax rules often allow businesses to accelerate these deductions, providing valuable opportunities to reduce taxable income immediately.

Strategy #1: Decide Whether to Take 100% Bonus Depreciation

For 2025, you may be eligible to claim 100% bonus depreciation on qualified assets acquired after January 19, 2025, and placed in service before the end of the year.

Why This Matters Now: Bonus depreciation is applied automatically unless you elect out, and that election must be made when you file your return.

Last-Minute Planning Tip for Strategy #1:

• Claim the full deduction if you want to maximize your 2025 tax savings and improve cash flow.

• Consider electing out if you expect higher income or tax rates in future years, when deductions could be more valuable.

**Note: Assets acquired before January 19, 2025, may only qualify for 40% bonus depreciation. Timing is crucial.

Strategy #2: Evaluate Section 179 Expensing Before You File

Section 179 allows you to immediately expense qualifying asset purchases. Unlike bonus depreciation, it gives you greater flexibility and control.

For 2025, the maximum Section 179 deduction is $2.5 million, with a phaseout starting at $4 million in total asset purchases.

Why This Matters Now: With Section 179, you have control. You can decide which assets to expense immediately and which to depreciate over time.

Last-Minute Planning Tip for Strategy #2:

• Use Section 179 to target specific assets for immediate write-offs.

• Section 179 deductions cannot create an overall business tax loss.

This strategy is particularly useful if you do not want to apply bonus depreciation to an entire asset class.

Strategy #3: Consider Qualified Improvement Property (QIP) Depreciation

If you made interior improvements to a commercial space or nonresidential building in 2025, those costs may qualify for accelerated depreciation.

Renovations that don’t qualify include building expansions, elevators or escalators, and structural framework changes.

Last-Minute Planning Tip for Strategy #3: QIP can qualify for bonus depreciation or Section 179, making it a powerful deduction, but only if it’s correctly classified on your tax return.

Strategy #4: Understand the Impact on Your QBI Deduction

If you own a pass-through business, your Section 199A qualified business income (QBI) deduction could be affected by your depreciation choices.

Why This Matters Now: Large first-year depreciation deductions reduce your taxable income but also decrease your QBI.

Last-Minute Planning Tip for Strategy #4:

• If you’re near income thresholds, accelerating depreciation could reduce or eliminate your QBI deduction.

• In some situations, spreading deductions over time may provide greater overall tax savings.

With the deadline just days away, depreciation remains one of the most impactful areas for last-minute tax planning. The choices you make now can affect both your current tax bill and your long-term financial strategy.

While it may be tempting to claim the largest deduction possible this year, that’s not always the best decision. Accelerating deductions now means forfeiting future write-offs. If you anticipate being in a higher tax bracket later, deferring some depreciation may be advantageous.

If you’re unsure which approach is right for you, now is the time to evaluate your options and create a plan before filing.