Tariffs and Accelerated Fixed-Asset Depreciation: Locking in Tax Savings Amid Rising Costs

Recent shifts in trade policy have made the cost of imported machinery, equipment and vehicles increasingly unpredictable. With tariffs on overseas-sourced assets rising on short notice, businesses face the risk of higher upfront prices and smaller tax deductions spread over many years. Fortunately, the tax code offers powerful tools, bonus depreciation and Section 179 expensing, that let you accelerate write-offs and offset much of the cost in the first year.

Understanding Fixed-Asset Depreciation

When you buy a capital asset, such as manufacturing equipment or delivery vehicles, you generally must capitalize its cost and deduct it over its useful life through annual depreciation. This process matches the expense with the revenue the asset helps generate, reducing taxable income each year.

Tariff Volatility and Purchase Timing

Tariffs can add 10%–25% or more to the landed cost of imported assets almost overnight. For example, an equipment order priced at $500,000 today could carry an extra $50,000–$125,000 in duties if a new tariff is imposed next month. By bringing planned acquisitions forward, you lock in current duty rates and avoid paying higher import taxes later.

Accelerating Deductions with Bonus Depreciation and Section 179

• Bonus Depreciation: Under current law, you can deduct a very large percentage of a qualifying asset’s cost in the year it’s placed in service. Though this percentage is set to phase down in coming years, immediate expensing can still shelter a substantial portion of your investment from tax in Year 1.
• Section 179 Expensing: This provision lets you elect to expense up to an annual dollar limit of qualifying property, subject to a phase-out as total acquisitions exceed a threshold. Properly classifying your assets and making the Section 179 election allows you to shift dozens or even hundreds of thousands of dollars of depreciation into the current tax year.

Next Steps and How We Can Help

Timing and classification are critical when it comes to accelerated depreciation. Our team at Strategic Tax Planning will help you:

• Evaluate upcoming tariff changes and their impact on asset pricing
• Model depreciation scenarios under bonus depreciation and Section 179
• Structure purchase and placement-in-service dates to maximize first-year deductions

Reach out at (202)-455-6010 or schedule a confidential consultation to lock in current duty rates and ensure your business captures every available tax benefit.