Oregon Just Changed the Rules on Bonus Depreciation — Here's What That Means for You
If your business buys equipment, vehicles, or other big-ticket items, there's a change coming out of Salem you'll want to know about. Oregon lawmakers recently passed Senate Bill 1507, and it breaks a link that's existed for years between Oregon tax rules and federal tax rules — specifically around something called "bonus depreciation."
Let's break down what that actually means, in plain English.
First, a Quick Refresher on Bonus Depreciation
Normally, when a business buys something like a piece of machinery or a company vehicle, the tax code doesn't let you write off the whole cost in year one. Instead, you spread that deduction out over several years as the asset "depreciates," or loses value.
Bonus depreciation is a special rule that lets businesses skip that waiting game. It allows a much bigger chunk — sometimes the entire cost — of a qualifying purchase to be deducted immediately, in the same year it's bought. Businesses love it because it lowers their tax bill right away and frees up cash sooner.
Up until now, Oregon has generally gone along with whatever the federal government allows here. Not anymore.
What's Actually Changing
Starting with purchases made on or after January 1, 2026, Oregon is stepping away from the federal bonus depreciation rules. The federal government still allows it — nothing changes on your federal return. But on your Oregon return, that same fast write-off won't be available.
Instead, Oregon will make you deduct the cost the old-fashioned way: a little bit each year, over the useful life of the asset.
Here's the practical effect: say your business buys $200,000 worth of new equipment in 2026. Federally, you might be able to deduct most or all of that right away. On your Oregon return, though, you'll only get to deduct a portion of it that year — the rest gets deducted gradually in future years.
That means your Oregon taxable income could end up noticeably higher than your federal taxable income in the year you make the purchase, even though nothing about the purchase itself changed.
Who This Hits
This isn't a narrow rule aimed at one type of business. It applies broadly:
• Businesses of any size operating in Oregon
• Partnerships, S corporations, and LLCs
• Individual owners who report business income on their personal Oregon returns
Basically, if you or your business places qualifying assets into service in Oregon starting in 2026, this rule is worth paying attention to.
The Silver Lining
Here's the good news: this isn't a rule that makes you lose the deduction forever. It's a timing issue, not a permanent one. You'll still get to deduct the full cost of the asset eventually — Oregon is just spreading it out instead of letting you take it all at once.
That said, "eventually" doesn't help much if you're trying to plan cash flow or estimated tax payments for this year. The mismatch between your federal and Oregon numbers also means you'll need to keep two separate depreciation schedules going forward — one for federal purposes, one for Oregon.
What You Should Do Now
If you've already made big purchases this year, or you're planning to, it's worth running the numbers before year-end catches you off guard. A few things worth reviewing:
• How this affects your Oregon estimated tax payments
• Whether your cash flow projections need adjusting
• Timing of any additional planned purchases
The bottom line: don't assume your Oregon tax bill will move in lockstep with your federal one anymore. If you have questions about how this applies to your specific situation, reach out — we're happy to walk through the numbers with you.