CREATE JOBS Act Makes 100% Equipment Write-Off Permanent, Adds Inflation Twist to Real Estate Depreciation

This bill, officially titled the Cost Recovery and Expensing Acceleration to Transform the Economy and Jumpstart Opportunities for Businesses and Startups Act—or the CREATE JOBS Act for short—is a major overhaul of how businesses handle tax deductions for investments, real estate, and research. It’s all about accelerating how quickly companies can write off expenses, and it’s going to affect everything from the local construction company buying a new crane to the tech startup paying its developers.

The Instant Write-Off is Here to Stay

For years, businesses have been able to use “full expensing” (also known as bonus depreciation) to immediately write off 100% of the cost of new equipment like machinery, computers, and vehicles. This provision was set to phase out, but Section 2 of the CREATE JOBS Act makes 100% expensing permanent. This is a huge deal for capital-intensive businesses. Think about a small-town manufacturer: instead of slowly deducting the cost of a new $500,000 piece of machinery over five to seven years, they can take the entire $500,000 deduction right now, lowering their taxable income instantly. The bill even applies this change retroactively to property placed in service after September 27, 2017, providing a definitive, long-term incentive for companies to invest now rather than later.

Real Estate Depreciation Gets an Inflation Adjustment

Section 3 introduces a complex new rule for owners of residential rental property and nonresidential real property (think apartment buildings, offices, and retail spaces). Normally, these properties are depreciated based on a fixed schedule (27.5 or 39 years). Now, the bill introduces a “neutral cost recovery ratio” that adjusts your annual depreciation deduction based on inflation, specifically using the GDP deflator. In simple terms, if inflation is high, your annual deduction could be higher than normal, allowing you to write off more sooner. This is meant to keep the value of the deduction “neutral” against economic changes. The catch? The calculation is highly technical, involving quarterly GDP deflators and a compounding factor. While property owners can elect to opt out of this new method entirely for any specific property, those who don't will face a significantly more complex calculation every year. For a landlord managing a few properties, this adds a layer of required accounting complexity that wasn't there before.

The End of Spreading Out R&D Costs

If you run a business that relies on innovation—whether it's a software firm, a biotech lab, or a specialized machine shop—Section 4 changes how you handle research and experimental (R&E) costs. Previously, companies had the option to amortize, or spread out, these costs over five years or more. This bill eliminates that option for tax years starting after December 31, 2021. Now, businesses must treat R&E costs as immediate expenses, deducting the full amount in the year they are incurred. While immediate expensing is great for cash flow, it removes flexibility for businesses that might have preferred to spread out those deductions to better match their revenue growth or manage their tax liability over several years. The bill also cleans up the interaction with the R&D tax credit, offering a new option to take a smaller credit without having to reduce the amount of R&E costs that can be deducted.