Bonus depreciation is a timing trade worth pricing, not a windfall
The Tax Foundation's three corrections give advisors the arithmetic for a year-end purchase conversation, and a reason to stop calling the writeoff a permanent cut.
The Tax Foundation's new analysis of bonus depreciation is valuable chiefly as a list of what the writeoff is not. The foundation argues that three claims in circulation misread the 2025 law: that immediate expensing is a permanent tax cut rather than a change in when deductions land, that its long-run cost to the federal government is as large as advertised, and that it amounts to a subsidy for business rather than the removal of a penalty the code imposes on capital investment.
What the law actually did, in the foundation's telling, was let firms once again fully and immediately deduct the cost of short-lived investments from taxable income, instead of the preset multiyear depreciation schedules they had been working under. The buildout in AI and its associated infrastructure — servers, the HVAC components that cool data centers — is the conspicuous beneficiary, and the current investment boom is running above projections in significant part because of it, the Tax Foundation notes. The provision applies to a much broader set of assets with nothing to do with AI, which means the same immediate writeoff sits behind the ordinary capital spending of any operating business.
Here is where a client conversation can go sideways. Expensing accelerates a deduction without enlarging the total claimed across an asset's life; what the owner captures is the value of claiming the cost in the purchase year instead of spreading it across a schedule, arithmetic that turns on the rate applied now against the rates in the years the deductions would otherwise have landed. A client whose rate is higher this year than it will be later comes out ahead by deducting sooner; one whose rate is heading up gets a different answer. Either way it is a financing argument for moving a planned purchase across a year boundary, not a reason to buy equipment the business had no use for.
The durability question sits underneath all of it: the Tax Foundation attributes part of a roughly 25 percent decline in corporate tax receipts over the past year to that investment growth, and argues the long-run fiscal cost is overstated precisely because the change shifts deductions rather than creating them. The economics may be sound, but a provision that shows up on the receipts line in that size is one that stays in play, which suggests advisors should present expensing as a current-law feature to be used now rather than a permanent fixture of the code.
At the desk, the question is narrower than the debate: whether a purchase already on the client's capital plan lands before or after the year turns, and what the deduction is worth in each case. The advisors who sell expensing as free money will spend the back half of the writeoff schedule explaining why the deductions thinned out.