Carolina Cat's Maximize Tax Savings with Bonus Depreciation

How you benefit from bonus depreciation under Section 168(k)

Bonus depreciation under Section 168(k) offers a powerful way to reduce taxable income for your construction business by allowing for 100% first-year write-offs on qualifying equipment including new, used, or reconditioned equipment. With these savings you improve cash flow and can reinvest into your operations immediately.

How it works for construction equipment

Purchase or finance new or used equipment, place it in service during the year and deduct 100% of the cost against taxable income.

For example, let's say you purchase or finance a new or used excavator for $500,000 and place it in service during the year. Under section 168(k) you can deduct the full $500,000 in year one instead of depreciating it over 5–7 years.

Reconditioned and rebuilt equipment

Bonus depreciation isn’t just for brand-new machines—it can also apply to used and rebuilt equipment when certain conditions are met. If the equipment is new to your business or you invest in major rebuilds, you may be eligible for significant tax savings.

Used or Dealer-Reconditioned Machines: Qualify if they are “new to you.”
Dealer-Rebuilt Equipment: The full purchase price including parts and labor can be deducted under bonus depreciation.

Rebuilding equipment you already own:

The original purchase price does not qualify again.
Capitalized rebuild costs (such as engine, transmission, or undercarriage) are treated as new property placed in service in 2025 and can qualify for 100% bonus depreciation.
Example: A bulldozer purchased in 2018 undergoes a $200,000 rebuild in 2025 (engine + transmission). That $200,000 qualifies for bonus depreciation, but the original 2018 purchase price does not.

Bonus Depreciation vs Section 179

Feature	Bonus Depreciation - Section 168(k)	Section 179
FeatureDeduction Limit	Bonus DepreciationNo limit	Section 179Up to $2.5M (2025, phased out after $4M)
FeatureNew Equipment	Bonus DepreciationEligible	Section 179Eligible
FeatureUsed Equipment	Bonus DepreciationEligible	Section 179Eligible
FeatureReconditioned Equipment	Bonus DepreciationEligible if 'new to you'	Section 179Eligible
FeaturePhase-Out	Bonus DepreciationPermanent under 2025 Bill	Section 179Phases out after cap

*Restrictions may apply. Carolina Cat and Caterpillar Financial does not provide tax or legal advice, and the information provided on this page does not, and is not intended to,
constitute legal or tax advice. Instead, all information and content provided herein is for general informational purposes only. Customers should always
consult their legal, tax or accounting advisor before making any decisions