Signed on July 4, 2025, the full impact of the One Big Beautiful Bill has yet to take full effect. Let’s take a look at the projected impact on the equipment rental and construction industry in general.
At its essence, the intent of the Bill is to drive the economy using incentives to drive capital investment in the U.S. A similar bill was passed in 2017, which promoted capital expenditures and purchases through bonus depreciation. This was then removed in the following administration. It’s anticipated that this focus on driving manufacturing to the U.S. will ultimately have a trickle-down effect: who’s going to build these facilities?
“Contractors are going to need equipment to do that. Rental companies are going to need equipment to do that,” says Chris Johnson, senior vice president of construction at Mitsubishi HC Capital America. Both the contractor and the equipment rental business have an incentive to buy new or used equipment because of the bonus depreciation — the increase in section 179 deductions.
There are short and long-term incentives. The short term allows buyers (such as contractors or equipment rental businesses) to be able to deduct a larger expense in their 2025 tax returns.
The long-term portion is the requirement that companies need to start building their manufacturing facility by January 2029 in order to qualify. One way to look at it is that the short-term benefits should drive growth at a micro level to create more equipment demand, and more manufacturing facilities will be able to be built because of the incentives.
Businesses can elect to expense up to $2.5 million under IRS Section 179. However, this begins to phase out as purchases exceed $4 million and fully phase out at $6.5 million.
Even with the incentives to purchase, there should remain plenty of opportunity for equipment rental businesses. “I think the demand for rental is going to continue to increase; it’s a growing market,” says Johnson. “They’ll be those customers that will, at some point, look at their tax liability and decide that it makes sense for them to buy a piece of equipment, but those same contractors are still going to have a level of their fleet that they rent.”
Likewise, the rental company will also be able to replace or upgrade aging / outdated equipment.
Depreciation is a non-cash expense on an income statement, reducing the company’s tax liability. This is important this year because there’s an allowance to deduct a greater level of depreciation.
For example, in previous years someone in a 30 percent tax bracket would have been only able to write off 20 percent on a $100,000 asset. That’s $6,000 of tax deferment.
Instead, the bonus depreciation deduction allows purchasers to depreciate 100 percent of the cost of the qualified asset (new or used,it's as long as it's “in service” after January 19, 2025). In a 30 percent bracket, that $100,000 purchase would allow $30,000 from a businesses tax liability. “It’s a huge differentiation with being able to accelerate that depreciation upfront versus over overtime,” says Johnson.
To be clear, where Section 179’s deduction has a cap, bonus depreciation does not. There is no cap on the total amount that can be depreciated under the provision.
Put simply, qualifying equipment can be defined as used for business more than 50 percent of its use. (Note: This is an oversimplification. There are likely nuances to different types assets for businesses such as technology hardware, a software upgrade, and others. It’s encouraged to speak to an accountant to ensure that purchases qualify for the tax benefit.)
The issue is, that you get to claim it once. While an owner (be that a contractor or equipment rental business) would be able to depreciate the purchase 100 percent this year, they aren’t going to have any additional tax liability deferments in subsequent years on the same asset. One could argue that it’s an incentive to purchase another asset year over year and get the tax advantages at once versus overtime.
“Your tax liability may be higher next year because you have used everything,” explains Johnson. “That’s why a lot of contractors start looking toward the end of the year asking about their tax liability.”
The Bill’s true effect has yet to make its long-term mark on the construction and rental industry yet, but the anticipation is optimistic; Johnson believes that it sets a foundation for a positive economic forecast.
