Major tax changes now in effect could significantly reshape year-end planning for equipment finance companies. Signed into law on July 4, 2025, the new budget reconciliation legislation (One Big Beautiful Bill Act) includes provisions that expand deductions, revive more favorable interest calculations, and make bonus depreciation permanent.
Several key changes will significantly impact equipment finance companies in 2025:
- Expanded Section 179 expensing
- Permanent 100% bonus depreciation
- Reinstated EBITDA-based interest deduction limits
Together, these changes offer new opportunities for businesses to reduce taxable income, preserve cash flow, and reinvest with greater flexibility. Here's what to watch—and how to respond.
Increased deduction cap
For 2025, the maximum Section 179 deduction rises to $1.25 million (an increase of $30,000 from 2024), while the phase-out threshold increases to $3.13 million. For purchases greater than $3,130,000, your §179 deduction is reduced, dollar for dollar. That means companies can write off more equipment costs upfront before deductions begin to phase out.
Consider this scenario: A company purchasing $5 million in qualifying assets this year can now apply a $2.5 million Section 179 deduction and follow it with 100% bonus depreciation on the remaining basis. With MACRS depreciation effectively removed from the equation, the full $5 million can be expensed in year one.
Simplified example to illustrate change from 2024 to 2025
| 2024 | 2025 | |
|---|---|---|
| Qualifying-asset purchase | $5,000,000 | $5,000,000 |
| §179 deduction | $1,220,000 | $2,500,000 |
| Bonus depreciation | $2,268,000 (60%) | $2,500,000 |
| MACRS | $302,400 (20%) | 0 (remaining basis eliminated, negating need for MACRS over remaining life) |
| First Year depreciation | $3,790,400 | $5,000,000 |
The impact of this rule modification is that you can apply $2.5 million in §179 deduction and then use 100% bonus depreciation on the remaining basis, without limit.
Bonus depreciation: permanently accelerated
Previously set to phase out, 100% bonus depreciation has now been made permanent under the new law. This applies to both new and used equipment, with no dollar cap. This is a powerful tax incentive for capital purchases. The impact of this change involves lowering taxable income or bigger refunds (less tax owed) which preserves cash.
Are your assets properly classified to maximize benefits under the new rule?
These regulatory changes provide an opportunity to reinvest, expand operations, or reduce outstanding debt through strategic asset management. To fully leverage these benefits, it is essential that eligible assets are correctly classified, purchased, and placed in service by December 31, 2025.
EBITDA-based interest deductions return
One of the more impactful updates in the new legislation is the restoration of EBITDA as the basis for calculating interest deduction limits under Section 163(j). For the past few years, businesses were limited by a stricter EBIT-based formula, which excluded depreciation and amortization. Now, those components are back in play, making the calculation more favorable for equipment-heavy operations.
The revised formula for adjusted taxable income (ATI) now includes taxable income, interest expense, depreciation, amortization and other allowable adjustments. The cap on deductible interest remains at 30% of ATI, but the broader definition can significantly increase the amount of deductible interest for many companies.
This change is particularly advantageous for capital-intensive, debt-financed businesses, especially those structured as C corporations, partnerships or S corporations with more than $30 million in average annual receipts. Even if a portion of interest expense exceeds the limit, it’s not gone for good. Disallowed interest can be carried forward indefinitely and used in future years when capacity improves.
By restoring the EBITDA test, this update offers a meaningful tax planning lever for companies managing large equipment portfolios and debt obligations. Now is a good time
What this means for your business
These updates don’t just offer short-term tax relief—they create long-term planning opportunities. Modeling EBITDA-based deductions may reveal higher capacity than EBIT-based calculations. Businesses should also review debt covenants to ensure definitions align with the revised ATI formula, especially around debt service coverage ratios. Tracking disallowed interest and keeping a running ledger of carryforwards will help ensure you’re ready to apply those deferred deductions in future years.
If your team needs assistance adjusting internal platforms, modeling the impact of these changes, or aligning year-end reporting with the new depreciation rules, Tamarack can help. Our experts can work with you to ensure your operations and tax strategies are optimized for 2025. To get started, contact us at support@tamarack.ai.
Written by
Shelly Kirsch
Senior Application Consultant
In her role as senior application consultant, Kirsch leads clients through a variety of projects including implementations, system assessments and migrations.