Federal Tax Policy Enhancements: Opportunities for businesses looking to lease or finance equipment

Consult Your Tax Professional

*Please consult your tax professional/accountant to fully understand the benefits and implications of bonus depreciation, Section 179, and how OBBBA legislation will impact your specific business. Scenarios below may not apply to all businesses. Merchants Bank and MBEF do not give tax advice.
 
With the passing of the OBBBA, equipment financing is entering a new chapter with 100% bonus depreciation restoration, Section 179 expensing cap increases and interest expense deduction enhancements – creating more opportunities for improved cash flow. In this article, Dave Schlauderaff, President of Merchants Bank Equipment Finance (MBEF), walks us through the changes and how the MBEF team is here to help your business find the right financing solutions that support long-term success.
 
 

Equipment Finance Considerations

The OBBBA has introduced several key changes that impact how businesses approach equipment financing:

• 100% bonus depreciation restored
• Section 179 expensing cap raised to $2.5 million
• Interest deduction rules improved (EBITDA-based)
• Stronger financial incentive to lease or finance equipment

 
Let’s walk through each of these changes and what it could mean for your business if you’re considering equipment finance in the near future.
 

100% Bonus Depreciation Restored

Change: Businesses can immediately expense qualifying assets placed in service after January 19, 2025, eliminating the previously scheduled phase-down.
 
Impact: Businesses can potentially write off the full cost of new equipment, reducing taxable income in the year of purchase.
 
“The restoration of 100% bonus depreciation means businesses can deduct the full cost of qualifying equipment in the year it’s placed in service,” shares Dave. “At MBEF, we see this as a powerful tool to improve cash flow, especially for businesses with larger capital budgets.”
 

Section 179 Expensing Cap Increased

Change: Small businesses can expense up to $2.5 million (up from $1.2 million in 2024) in qualifying property, creating an expanded opportunity for scaling and equipment operations. The phase-out threshold also rises to $4 million.
 
Impact: Small and mid-sized businesses will be able to expense even more equipment upfront, potentially and significantly lowering their near-term tax burden.
 
Dave explains, “[w]ith Section 179 now capped at $2.5 million, businesses can gain immediate buying power. MBEF is here to help you expense more equipment upfront and make strategic purchases that fuel long-term growth.”
 

Interest Expense Deduction Enhanced

Change: The legislation reverts the business interest deduction to an EBITDA (Earnings Before
Interest, Taxes, Depreciation, and Amortization) based limit instead of EBIT (Earnings Before Interest and Taxes)—allowing many companies to deduct more interest on financed purchases.
 
Impact: Businesses can deduct more interest in financed equipment; improving after-tax cash flow and making borrowing more attractive while reducing the total cost of ownership.
 
“We always tell our customers: cash is king,” shares Dave. “Use financing to preserve your liquidity for other business needs, like hiring, expansion or unexpected expenses.”

 

150 Years of Serving

“As we celebrate 150 years, Merchants Bank and MBEF remain committed to helping businesses fulfill their hopes and dreams. We’re not just financing equipment, we’re building relationships and supporting growth in the communities we serve,” finishes Dave.

 

About MBEF

Merchants Bank Equipment Finance is a trusted financing and business partner, committed to supporting the growth of companies nationwide. This commitment to excellence and leadership is proven by the division’s consistent recognition on the prestigious Monitor 101+ top equipment financing companies list.
 
MBEF specializes in flexible equipment financing, typically for assets valued from $50,000 to over $10 million, across key sectors including Construction, Agriculture, Manufacturing and Healthcare. The MBEF team provides deep industry knowledge and a community-focused approach to help clients make sound financial decisions that drive lasting success.