100% Bonus Depreciation Is Back: Recording OBBBA Changes in QuickBooks Online

100% Bonus Depreciation Is Back: Recording OBBBA Changes in QuickBooks Online

Yes, 100% bonus depreciation is back, and this time it is permanent. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, restored full first year expensing for qualified property acquired and placed in service after January 19, 2025. That reverses the phasedown schedule the Tax Cuts and Jobs Act had put in motion, which cut bonus depreciation to 60% in 2024 and 40% in 2025 on its way to zero by 2027. Businesses buying equipment, machinery, computers, furniture, or qualified improvement property can once again deduct the entire cost in year one for federal tax purposes.

OBBBA changed more than the bonus rate. Section 179 expensing limits doubled to $2.5 million with a $4 million phase-out threshold, both now indexed for inflation. A new Section 168(n) allows 100% expensing for certain nonresidential real property used in qualified production activities. None of this changes how you depreciate assets in QuickBooks Online, though, and that is the part that trips people up. QBO holds your book depreciation. Bonus depreciation is a tax deduction that lives on the return. This post walks through what changed, what to record in QBO, and how to keep the book side and the tax side from bleeding into each other.

What OBBBA Actually Changed

The headline provision is the permanent return of 100% bonus depreciation under Section 168(k). Qualified property is generally tangible property with a recovery period of 20 years or less: machinery, equipment, vehicles, computers, furniture, and qualified improvement property. Used assets qualify too, as long as you acquired them in an arm's length transaction and hadn't used them before. The cutoff that matters is acquisition. Property must be acquired and placed in service after January 19, 2025, and acquisition generally means the date a written binding contract was signed. Assets under contracts signed on or before that date fall back to the old phasedown rates, so keep your contract dates documented.

Section 179 got a parallel upgrade. The deduction limit jumped from about $1.25 million to $2.5 million, and the phase-out threshold moved from roughly $3.13 million to $4 million of qualifying purchases. The deduction shrinks dollar for dollar above the threshold and disappears entirely once purchases hit $6.5 million. Both numbers are permanent and adjust annually for inflation, landing at $2,560,000 and $4,090,000 for 2026. Section 179 still matters even with 100% bonus available, because it gives you asset by asset control. You can elect it on some purchases and not others, which is useful in states that treat Section 179 more kindly than bonus depreciation.

Here is the before and after at a glance.

One more sign of how settled these rules now are: OBBBA provisions are testable on the 2026 CPA exam. New candidates are learning permanent 100% expensing as the baseline, not as a temporary stimulus measure. If your firm's review materials or client memos still describe the phasedown, they're out of date.

Book vs Tax Depreciation in QuickBooks Online

QuickBooks Online tracks exactly one set of depreciation numbers: your books. There is no tax depreciation module, no Form 4562 integration, and no place to store MACRS lives or bonus elections. That is not a flaw to work around so much as a boundary to respect. Your QBO file should present GAAP financials, and GAAP does not recognize bonus depreciation. Under GAAP you depreciate an asset over its useful life using a rational, systematic method, usually straight line for small and mid-sized companies.

The mechanics in QBO are simple. Each asset category gets a fixed asset account (Machinery and Equipment, Vehicles, Computer Equipment) and a paired contra account (Accumulated Depreciation) that carries a credit balance and nets against the asset on the balance sheet. Depreciation Expense sits on the P&L. When you buy an asset, the cost lands in the fixed asset account. Each month, a journal entry moves a slice of that cost to expense through accumulated depreciation. The asset's net book value at any point is cost minus accumulated depreciation.

Tax depreciation lives somewhere else entirely: in your tax preparer's fixed asset software, on Form 4562, and in the depreciation schedules attached to the return. The tax side will show a $150,000 machine fully deducted in year one. The book side will show the same machine depreciating at $1,250 a month for ten years. Both are correct. They are answering different questions. This same book versus tax discipline shows up in other areas too; if you've worked through capitalizing leases in QuickBooks Online, the pattern will feel familiar: QBO carries the accounting treatment, and the tax treatment is tracked outside the ledger.

The Journal Entries

Say your company buys a CNC machine for $150,000 on August 1, 2025, financed with $30,000 cash and a $120,000 equipment loan. Useful life is ten years, no salvage value, straight line. Two entries handle everything QBO needs to know.

Entry 1: record the purchase.

Debits equal credits: $150,000 on each side. The full cost is capitalized regardless of how it was financed. Nothing hits the P&L yet.

Entry 2: monthly book depreciation. $150,000 over 120 months is $1,250 per month, starting the month the asset is placed in service.

Set this up as a recurring journal entry in QBO and it runs itself. After five months, accumulated depreciation shows $6,250 and the machine's net book value is $143,750.

Notice what's missing: there is no bonus depreciation entry. Do not book a $150,000 depreciation expense in QBO because the tax return deducts it. That single entry would wipe out reported profit, distort every margin metric, understate assets, and hand your lender a covenant problem. If a prior bookkeeper already did this, the fix is a correcting entry restoring the asset to its proper net book value and restating depreciation expense to the GAAP amount.

Where the Book-Tax Difference Goes

Full expensing on the return plus straight line on the books creates a temporary difference. In year one, tax deducts $150,000 while the books deduct $6,250 (five months at $1,250). Taxable income runs $143,750 below book income. That gap reverses over the following nine and a half years as the books keep depreciating an asset the return has already written off. During the reversal years, taxable income runs above book income.

For companies that report under GAAP with full tax provisions, this temporary difference generates a deferred tax liability: taxes you will owe later because you took the deduction now. At a 25% combined rate, the $143,750 difference produces a deferred tax liability of about $35,938 in year one, unwinding as book depreciation catches up. We covered the mechanics, journal entries, and rate change effects in how deferred tax accounting actually works under US GAAP, and bonus depreciation is the single most common source of deferred tax liabilities you'll see in practice.

Even if you don't book a formal tax provision, track the difference somewhere deliberate. The practical toolkit: a fixed asset register listing every asset with cost, in-service date, book method, and tax method; the depreciation schedules from the return; and the Schedule M-1 or M-3 reconciliation that ties book income to taxable income. Smaller companies often keep the register in a spreadsheet. That works until you have three entities and two hundred assets, at which point it quietly stops working.

The State Conformity Trap

Federal permanence does not mean uniformity. A large group of states decouple from Section 168(k) entirely or in part. California does not conform to bonus depreciation at all. New York requires an addback. Other states allow a fraction of the federal deduction or spread it over several years. The usual mechanics: add the federal bonus deduction back to state taxable income, then take the state's own depreciation deduction on its schedule, which means you may be carrying a third depreciation calculation per asset. Section 179 conformity is generally broader but not universal, and state limits sometimes lag the federal ones.

If you operate or file in multiple states, do not assume the shiny new federal deduction flows through. Model the state impact before making elections, because in some cases electing Section 179 instead of bonus, or electing out of bonus for a class of property, produces a better combined result. This is exactly the kind of decision your tax advisor should run before year end rather than discover at filing time.

The Multi-Entity Problem: Depreciation Visibility Across QBO Files

Now multiply everything above by the number of entities in your group. A holding company with an operating company, a real estate entity, and an equipment entity has four QBO files, four fixed asset ledgers, four sets of accumulated depreciation accounts, and one consolidated balance sheet that has to make sense. Fixed-asset-heavy groups feel this hardest: construction companies, manufacturers, logistics operators, restaurant groups, and medical practices with imaging equipment.

The questions that come up are predictable. What is total net book value of equipment across the group? Which entity holds the assets that drove this year's bonus deduction? Is every entity actually posting its monthly depreciation entry, or did one file fall three months behind? When an asset moves between entities, did both sides record it? Answering these by exporting four balance sheets to a spreadsheet every month is how depreciation errors survive until the auditors find them.

This is the layer where FinBoard.ai fits. FinBoard sits on top of all your QuickBooks Online files and gives you consolidated and per-entity reporting from live data: fixed asset and accumulated depreciation balances by entity, depreciation expense trends that make a skipped month obvious, and consolidated statements that eliminate intercompany asset transfers instead of double counting them. Accounting firms use the same setup to standardize this across their whole client base; we wrote about that pattern in how firms deliver consolidated reports across 50 QuickBooks clients. The point isn't replacing your fixed asset register. It's making the book side visible, current, and consistent across every entity so the tax work starts from clean data.

Year-End Checklist for CPAs and Controllers

Before closing 2025 or 2026, run through this list for every entity:

• Confirm acquisition dates. Property acquired after January 19, 2025 gets 100% bonus; contracts signed on or before that date fall under the old phasedown rates. Pull the binding contract dates for anything purchased near the cutoff.
• Verify placed-in-service dates. An asset sitting in crates on December 31 isn't placed in service. Depreciation, both book and tax, starts when the asset is ready and available for use.
• Reconcile the fixed asset register to QBO. Every asset account balance should tie to a register listing individual assets. Investigate anything expensed that should have been capitalized, and vice versa.
• Check that monthly depreciation entries actually posted. Recurring entries fail silently when accounts get renamed or deactivated. Scan depreciation expense by month for gaps.
• Decide Section 179 vs bonus per asset class. With both at 100%, the choice is about state conformity, income limits, and flexibility, not the federal deduction amount.
• Model state addbacks. Quantify the state tax cost of bonus depreciation in nonconforming states before finalizing elections.
• Update the deferred tax computation. New 100% deductions mean larger year-one temporary differences and larger deferred tax liabilities than the 40% world you modeled last year.
• Document intercompany asset transfers. Both entities need matching entries, and consolidation needs to eliminate any intercompany gain.

Frequently Asked Questions

Is 100% bonus depreciation permanent now?

Yes. The One Big Beautiful Bill Act, signed on July 4, 2025, made 100% bonus depreciation permanent for qualified property acquired and placed in service after January 19, 2025. There is no longer a phasedown schedule to plan around at the federal level.

Do I record bonus depreciation in QuickBooks Online?

No. QuickBooks Online holds your book depreciation under GAAP. Bonus depreciation is a tax concept that lives on Form 4562 and in your tax depreciation schedules. Recording the full tax deduction in QBO would misstate your GAAP financials. The gap between book and tax depreciation is a temporary difference handled through deferred taxes.

What are the new Section 179 limits under OBBBA?

OBBBA raised the Section 179 deduction limit to $2.5 million with a phase-out beginning at $4 million of qualifying purchases for 2025, up from roughly $1.25 million and $3.13 million before the law. Both figures are now permanent and indexed for inflation, reaching $2,560,000 and $4,090,000 for 2026.

Do all states follow the new federal bonus depreciation rules?

No. Many states decouple from federal bonus depreciation and require an addback of the federal deduction, replaced by the state's own depreciation schedule. California, New York, and a number of other states do not conform. Check each state where you file before assuming the federal deduction carries through.

Depreciation is one of those areas where the tax law just got simpler and the bookkeeping discipline got more important. Keep GAAP in QuickBooks Online, keep bonus depreciation on the return, and keep the difference tracked and visible. If you're managing that across multiple entities, FinBoard.ai gives you consolidated, per-entity reporting on top of all your QBO files so the book side is always ready for the tax side. Start a free trial and see your whole group's fixed assets in one place.

Take it with you: the free Bonus Depreciation and Section 179 Planner works through the elections in this article asset by asset, with the 2025 and 2026 limits built in.

This article is general information, not tax advice; talk to your CPA or tax advisor about your specific situation.