Entity Setup | Case Studies
Entity Setup & Case Study: Leveraging 100% Bonus Depreciation for Start-ups
New guidance makes 100% first-year bonus depreciation permanent for eligible property – crucial for new entities planning capital investments.
By NomadicTax Research Team • 7 min read • June 11, 2026
## Overview of 100% Additional First-Year Depreciation (Bonus Depreciation)
The One, Big, Beautiful Bill (OBBB) permanently restores **100% bonus depreciation** for qualified property acquired after **January 19, 2025**. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill?utm_source=openai))
This lets businesses deduct the full cost of eligible property in the year it’s placed in service, rather than depreciating over several years.
### What Property Qualifies?
- Tangible depreciable property used in business (machinery, equipment, etc.) acquired after Jan. 19, 2025. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill?utm_source=openai))
- Certain **specified plants** planted or grafted.
- **Sound recording productions** that begin principal recording after July 4, 2025, also qualify. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill?utm_source=openai))
### Election Options & Electing Out
- Businesses may elect to **take 40% instead of 100%** in certain cases.
- They may also elect out entirely for some property. Understanding these options is key to optimal tax outcomes. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill?utm_source=openai))
## Case Study: Tech Start-up with Capital Investment
**Scenario**: A tech start-up, “Innovate LLC,” buys $2 million worth of machinery in March 2026, and also begins a sound recording production in August 2025.
- For **machinery** placed in service in 2026: qualifies for full 100% bonus depreciation, so the entire $2 million cost can be deducted in tax year 2026.
- For **sound recording** that started August 2025: also eligible, since recording commenced after July 4, 2025. Full deduction in 2026.
- If Innovate LLC expects to generate higher taxable income or reach AMT thresholds, they might elect to deduct 40% on expensive equipment and spread remainder to match income patterns.
## Implications for Entity Setup & Structure
- Entities heavily investing in physical assets benefit more from C-corporation structure (no pass-through limitations, etc.).
- For pass-throughs (LLCs, S-corps), making sure depreciation decisions are aligned with owners’ overall income and tax bracket helps avoid wasted deductions.
- Be cautious: bonus depreciation won’t reduce NOLs below zero—carryforwards still matter.
## Steps for Businesses Starting Now
1. Catalog potential qualifying assets, and timing of acquisition and placing in service.
2. For sound recording, ensure that principal recording date is documented after July 4, 2025.
3. Decide whether to elect the default 100% or choose partial depreciation depending on cash flow and profit forecasts.
4. Analyze entity type: some structures allow better use of depreciation versus others.
5. Coordinate with CPA or tax advisor to integrate bonus depreciation into forecasts.
１００ ％ bonus depreciation can be a high-impact advantage for start-ups and asset-intensive businesses. When set up properly, it provides powerful upfront deductions, improves cash flow, and accelerates return on investment.