What Recent Tax Law Changes Mean for Equipment Rental Companies
In July 2025, Congress passed sweeping new tax legislation—formally called the One Big Beautiful Bill Act—that introduces several changes with major benefits for the construction equipment rental industry.
Here’s a breakdown of the most relevant updates and how they can impact your business operations and bottom line.
1. 100% Bonus Depreciation Is Back
What changed: Businesses can now deduct the entire cost of most equipment in the year it's purchased and placed into service. This applies to both new and used assets.
Why it matters:
Rental companies can now fully write off purchases like loaders, lifts, and trailers immediately—rather than depreciating them over several years. This significantly lowers taxable income and boosts short-term cash flow, freeing up more capital to reinvest in your fleet.
2. Higher Section 179 Expensing Limit
What changed: The annual limit for Section 179 deductions increased to $2.5 million, with phase-out beginning at $4 million.
Why it matters:
This is especially helpful for small to mid-sized rental businesses. If you purchase several pieces of equipment in a single year, you can now deduct more of those costs upfront—helping you reduce tax liability and keep more cash in the business.
3. Full Deduction for New Facilities or Improvements
What changed: Businesses can now fully expense certain nonresidential property improvements or construction projects—as long as construction begins after January 19, 2025, and the property is placed in service by 2031.
Why it matters:
If you’re expanding a yard, upgrading a maintenance shop, or building a new location, you can deduct the full cost in the year it's completed. This lowers the cost of growth and makes it easier to invest in infrastructure.
4. Improved Interest Deduction Rules
What changed: The limit on how much interest businesses can deduct was loosened—now calculated based on EBITDA instead of EBIT.
Why it matters:
Rental businesses that borrow money to finance equipment or facility purchases can now deduct a larger portion of their interest costs. This makes borrowing more tax-efficient and may make debt financing more attractive.
5. Immediate Write-Off for R&D Expenses
What changed: Companies can now immediately deduct U.S.-based research and development costs in the same year they’re incurred.
Why it matters:
If your business invests in new software, custom equipment modifications, or technology integrations, you can now fully expense those efforts right away. This encourages innovation while providing real tax savings.
6. Increased Deduction for Pass-Through Entities
What changed: The Qualified Business Income (QBI) deduction for pass-through businesses was made permanent and raised to 23%.
Why it matters:
If your company is structured as an LLC, S-Corp, or partnership, you may now be able to deduct 23% of your qualified business income—lowering your effective tax rate and improving take-home profit.
7. Estate Tax Relief for Family-Owned Businesses
What changed: The federal estate tax exemption rose to $15 million per person and is indexed for inflation.
Why it matters:
This is a major benefit for family-run rental companies. It makes it easier to pass the business down to the next generation without triggering costly estate taxes that could force asset sales or restructuring.
Takeaways for Equipment Rental Operators
These recent tax law changes offer some of the most business-friendly conditions in years—especially for capital-intensive industries like equipment rental. Whether you're planning to purchase new gear, expand your footprint, or invest in technology, the new rules create opportunities to lower your tax bill and strengthen your financial position.
Now is a great time to meet with your tax advisor to make sure your business strategy is aligned with these updates.
