Picture this: you just spent $60,000 on a new service truck, and your CPA tells you that you may be able to write off the entire thing this year. Not over five years. All of it, now.
That's what 100% bonus depreciation makes possible, and recent legislation made it permanent. If you're an HVAC contractor buying trucks, tools, or equipment, this rule can put serious money back in your pocket at tax time.
The catch: the deduction depends on clean, correctly categorized records, and that's where a lot of HVAC businesses lose part of the benefit. This post covers how bonus depreciation works in plain terms, which assets qualify, what the savings can look like, and which bookkeeping entries need to be in place before you file.
This article is general information, not tax advice. Confirm how these rules apply to your business with your CPA.
Normal depreciation spreads an asset's cost across IRS recovery periods, typically 5 years for vehicles and 7 years for most equipment. Bonus depreciation lets you deduct 100% of the cost of qualifying property in the year it's placed in service.
"Placed in service" is the term to understand before claiming anything. The asset has to be operational and ready for use in your business during the tax year, not just purchased or on order. A truck delivered December 30 that you're driving on jobs qualifies. One sitting unregistered on your lot may not.
Bonus depreciation had been phasing down: 80% in 2023, 60% in 2024, 40% in 2025, then 20% in 2026 and zero after that. The One Big Beautiful Bill Act, signed in 2025, reversed that. For qualifying property acquired and placed in service after January 19, 2025, the rate is 100%, with no scheduled phase-down.
According to IRS Publication 946, qualifying property generally includes tangible personal property with a recovery period of 20 years or less. That covers the core assets HVAC contractors buy: service vehicles, recovery machines, vacuum pumps, diagnostic tools, and shop equipment.
The permanence is the real planning shift. Before this law, owners had to time purchases into specific tax years to capture a higher rate. That pressure is gone.
Service trucks and vans are generally 5-year property and eligible. One important condition: vehicles with a gross vehicle weight rating (GVWR) over 6,000 pounds, which includes most full-size work vans and pickups, generally aren't subject to the annual depreciation caps that apply to lighter passenger vehicles. A $50,000 truck in that category can typically be fully deducted in the year you put it to work. Lighter vehicles are capped, so check the GVWR on the door sticker before you assume the full write-off.
Company-owned equipment your business uses, like recovery machines, vacuum pumps, nitrogen kits, and shop tools, qualifies as tangible personal property.
Technician tools such as gauges, manifolds, and diagnostic equipment qualify too. Lower-cost items may simply be expensed under the de minimis rules instead.
Equipment you install for customers is a different animal. A condenser or rooftop unit you sell and install as part of a job isn't your asset at all. It's cost of goods sold for that job. It shouldn't be on your fixed asset list, and you don't depreciate it.
Equipment built into a building you own is also different. Components that become part of a building's structure are generally treated as real property with a much longer recovery period, though some HVAC improvements to nonresidential buildings can qualify for Section 179. That's a question for your CPA.
Mixed-use assets add another layer. If a truck sees any personal use, only the documented business-use percentage counts. No mileage log means no defensible percentage.
This is where generalist bookkeepers create real problems. Someone unfamiliar with HVAC will often code a recovery machine and a customer's condenser the same way, which either loses the deduction or creates an audit issue. The right category has to be assigned when the purchase is entered, not cleaned up later.
Example 1: Service truck at $50,000 (over 6,000 lbs GVWR)
On a standard 5-year schedule, year-one depreciation would be about $10,000. With 100% bonus depreciation, the full $50,000 can be deducted in year one. At an illustrative 25% effective tax rate (your actual rate depends on your entity type and state), that's $12,500 in tax savings this year instead of spread across five.
Example 2: Company equipment at $15,000
Same math. The full $15,000 is deductible in the year the equipment is placed in service instead of over a 5- to 7-year schedule. Several purchases in one season stack.
Example 3: Fleet addition at $110,000
A business adding two heavy trucks and specialty equipment totaling $110,000 could deduct the full amount in year one. At the same illustrative 25% rate, that's $27,500 less in tax for the year, cash that stays in the business.
All three assume the assets are used entirely for business and placed in service by December 31 of the tax year, and both need documentation. The deduction is claimed on Form 4562, so your books need accurate cost basis, acquisition dates, and asset descriptions to support it.
Your CPA may mention Section 179 in the same conversation. It's similar, but not identical.
Section 179 is an election that lets you deduct the cost of qualifying assets in year one. The limit is $2,500,000 for 2025 and $2,560,000 for 2026, with the deduction phasing out once total qualifying purchases pass $4,000,000 (2025) or $4,090,000 (2026). For most HVAC contractors, those caps aren't a real constraint.
The practical differences:
For many small HVAC contractors, both produce the same year-one deduction. The differences matter at filing time, when your CPA chooses the path that fits your income for the year, so your books need to support either.
That's why your bookkeeper should flag every significant equipment purchase to your CPA before December 31, not in February.
Enter every asset when you buy it, not at year-end. Your fixed asset register needs six things for each item: description, acquisition date, cost basis, asset class, placed-in-service date, and business-use percentage. Reconstructing this from receipts in December is how details get lost.
The initial entry matters. When you buy a service truck, debit a fixed asset account (Vehicles) and credit Cash or Loan Payable. Don't route the purchase to an operating expense account like Repairs or Supplies. That bypasses your asset records, and the deduction won't be supported correctly on Form 4562.
Record depreciation at year-end to match what your CPA claims. If your books and Form 4562 don't reconcile, that invites questions.
Financed trucks use the full purchase price as cost basis, not just your down payment. If you put $10,000 down on a $50,000 truck, the depreciable basis is $50,000. Entering only the cash you paid is one of the most common errors in HVAC bookkeeping, and it directly shrinks the deduction.
Keep the supporting documents: the purchase invoice, any financing agreement, business-use evidence (mileage logs for vehicles), and proof of the placed-in-service date.
Keep customer equipment out of fixed assets. A condenser bought for a customer's install belongs in cost of goods sold or inventory, never in your fixed asset register. Separate accounts for company-use equipment and job materials keep that line clean.
Federal bonus depreciation doesn't automatically flow through to your state return. Some states don't follow the federal rules, which means your state taxable income can be noticeably higher than your federal taxable income in the same year. California, for example, has historically required an addback of federal bonus depreciation.
For contractors working in more than one state, each state can have different rules. That can mean keeping separate federal and state depreciation schedules for each asset, which is easy to get wrong without a system built for it.
Confirm your state's current rules with your CPA before filing, and make sure your estimated tax payments account for any difference between your federal and state numbers.
Pull your fixed asset register. Confirm every truck and piece of company equipment bought this year is listed with the correct cost basis, acquisition date, and placed-in-service date.
Ask your CPA whether Section 179 or bonus depreciation fits your income this year, especially if you're near a loss.
Ask your bookkeeper for a current fixed asset schedule. If that request gets a blank look, you have a records gap to fix before your return is filed.
The deduction is real and it's permanent, but it isn't automatic. Clean records and correct classification separate contractors who claim what they're owed from those who leave money on the table. If you want bookkeeping that tracks your fleet and equipment correctly from the start, book a free call with 911 Bookkeepers.
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Jeremy Brewer is the founder of 911 Bookkeepers LLC in Baton Rouge, Louisiana. He worked in the field as an HVAC tech before building books for the trades, and he serves as a licensed paramedic in EMS. He is a Xero Certified Advisor.
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