Bonus Depreciation Financing
Buy a telehandler now and use bonus depreciation to expense a large share of the cost in year one. Works with loans and dollar-buyout leases. challenged credit reviewed.
Bonus depreciation lets you deduct a percentage of qualifying equipment cost in the year the machine is placed in service, over and above what the regular MACRS depreciation schedule allows. For telehandler buyers with current-year income to shelter, it is a powerful first-year write-off tool that works alongside or instead of Section 179.
The bonus depreciation percentage has shifted under recent tax legislation. It was 100 percent under the Tax Cuts and Jobs Act for assets placed in service from 2018 through 2022. It stepped down to 80 percent in 2023, 60 percent in 2024, and continues phasing down under current law through 2026 and beyond. The year of purchase matters. Buying and placing a construction telehandler in service this year locks in the current bonus rate on that machine.
How Bonus Depreciation Works With Financing
You finance the telehandler with a loan or a dollar buyout lease. Title is in your business name. The machine is placed in service before year-end. Your tax advisor elects bonus depreciation on the return, applying the current bonus percentage to the machine's depreciable basis. The remainder is depreciated under standard MACRS over the asset's remaining life.
The deduction does not require you to pay cash for the machine. A 100-percent financed purchase on a $150,000 telehandler generates a first-year deduction equal to the bonus percentage times $150,000. The monthly loan payment is a separate cash obligation; the deduction is based on the asset's cost, not your cash outlay.
Bonus depreciation and Section 179 can be layered. In a year where you have multiple equipment purchases, Section 179 is elected first on the purchases of your choosing, up to that year's cap. Bonus depreciation then applies to the remaining basis or to equipment that was not Section 179-elected. The two tools work together for operators buying multiple machines in a single year.
Why the Phase-Down Creates Urgency
Every year the bonus rate steps down, the deduction shrinks. A $200,000 telehandler purchased in a year with 60 percent bonus yields a $120,000 first-year deduction on the bonus alone. The same machine in a year with 40 percent bonus yields $80,000. The difference of $40,000 in deductions, applied at a 25 percent tax bracket, is $10,000 in real tax dollars.
Operators who have been considering a new or used telehandler purchase and are in a profitable year have a genuine financial incentive to act. The machine itself does not get cheaper waiting. Equipment prices have been sticky at elevated levels. And the bonus rate does not go back up under current law. General contractors with profitable years and known equipment needs should be running this calculation with their tax advisors annually.
Used telehandlers also qualify for bonus depreciation under current law, as long as the machine has not previously been used by your business. A low-hour used unit purchased from a dealer, auction, or private seller qualifies at the same bonus rate as new iron. That gives buyers pursuing used equipment financing access to the same first-year deduction benefit.
Who Uses Bonus Depreciation on Telehandlers
Steel erection contractors and large commercial crews with significant year-end income often run multiple equipment purchases through bonus depreciation to bring taxable income down before January. A contractor netting $600,000 in a project-heavy year can use a $200,000 telehandler purchase to shelter $120,000 to $200,000 of that income depending on the bonus rate and whether Section 179 is also applied.
Farm operations also use bonus depreciation aggressively. Telehandlers used on farms (for hay stacking, livestock feed handling, grain bin maintenance) qualify as farm equipment under MACRS with potentially faster depreciation lives than standard construction equipment. The bonus percentage applies to either life class.
Rental companies buying into their rental telehandler fleet often time purchases for bonus depreciation. Rental income is taxable; equipment depreciation offsets it directly. A rental yard running 15 telehandlers in a profitable utilization year may buy two or three new units in Q4 specifically to use bonus depreciation against that year's rental income.
Bonus Depreciation Questions
Common Questions on Bonus Depreciation Financing
Straight answers before you send the equipment file.
Does the telehandler have to be brand new to claim bonus depreciation?
No. Used equipment placed in service for the first time by your business qualifies for bonus depreciation under current law. The machine must be new to you, meaning your business has not previously owned or used it. A used telehandler bought at auction qualifies at the same bonus percentage as a new dealer unit.
If bonus depreciation creates a loss, can I still claim it?
Yes, subject to at-risk and passive activity rules. Bonus depreciation can generate or increase a net operating loss (NOL) in the year of purchase. Under current law, NOLs can be carried forward indefinitely but are limited to 80 percent of taxable income in the year applied. Consult your tax advisor for your specific situation.
Can I combine bonus depreciation on a telehandler with depreciation on the attachments?
Yes. Attachments financed and placed in service in the same year as the host machine are separate qualifying assets. A truss boom, carriage, and bucket purchased and placed in service before year-end each generate their own bonus depreciation deduction.
What bonus depreciation percentage applies to my purchase?
The rate depends on the year you place the machine in service. The rate stepped from 100 percent (2018-2022) to 80 percent (2023) to 60 percent (2024) and continues phasing down. Your tax advisor will confirm the current rate for the year you are purchasing.
Does bonus depreciation affect my ability to do a Section 179 election on the same machine?
Section 179 and bonus depreciation can be elected on the same asset but only once. Typically, Section 179 is elected first, up to the annual cap. If the full basis is expensed under Section 179, there is no remaining basis for bonus depreciation on that machine. If Section 179 is not elected on a machine, bonus depreciation applies to the full basis.
Get Terms on Bonus Depreciation Financing
Tell us what you are buying, who is selling it, and when you need it earning. We will review the file and point you to the next step.