For most businesses, a major lighting investment gets treated as a long-term capital expense. That means spreading the cost across 15 years of depreciation, recovering it slowly while the cash is already gone. As of July 4, 2025, that math changed permanently.
The One Big Beautiful Bill Act restored 100% bonus depreciation with no phase-out and no expiration date. If you are planning a commercial lighting project, you can now deduct the full cost in the year you put it in service.
That is a meaningful shift for restaurant groups, fitness operators, retailers, and any business making a serious investment in its physical environment.
What Bonus Depreciation Actually Does
Standard depreciation requires you to recover an asset’s cost gradually over its IRS-assigned useful life. Qualified Improvement Property, which covers most interior lighting upgrades to nonresidential buildings, carries a 15-year recovery period.
Under the old rules, a $200,000 lighting project would produce roughly $13,000 in deductions per year. Under 100% bonus depreciation, that same project generates the full $200,000 deduction in year one.
That front-loaded deduction directly reduces taxable income for the year the project is placed in service. The result is lower taxes owed sooner and real cash available for other priorities.
Why Lighting Qualifies So Cleanly
Lighting fixtures, controls, LED systems, and dimming infrastructure are tangible personal property or Qualified Improvement Property. QIP covers interior improvements made to nonresidential buildings after the original construction is complete. Lighting retrofits and full redesigns both fit squarely within that definition.
QIP carries a 15-year MACRS recovery period, well inside the 20-year threshold required for bonus depreciation eligibility. Both new and used property qualify, provided the taxpayer has not previously used the specific asset. That means a first-time build-out and a lighting renovation at an existing location are both eligible.
The numbers are straightforward. A 12,500-square-foot restaurant investing $150,000 in a full lighting package can deduct the entire $150,000 this year. A 50,000-square-foot fitness facility investing $400,000 writes off the full amount in year one. Spread across 15 years, those same projects would produce annual deductions of $10,000 and $26,667, respectively. The difference in cash flow impact is substantial.
New Builds and Retrofits Both Work
For new construction, the key is separating lighting fixtures and controls from the building structure itself. The building shell depreciates over 39 years and does not qualify for bonus depreciation. However, fixtures, LED systems, wiring dedicated to lighting equipment, and control infrastructure can often be classified as shorter-lived property. A cost segregation study documents exactly which components qualify and at what classification.
For existing spaces, the case is simpler. Replacing or upgrading lighting in an operating commercial building is a textbook QIP scenario. The improvements are interior, non-structural, and made after the building was originally placed in service. Those three conditions are the core test, and a well-documented lighting replacement or renovation typically meets all three.
What You Need to Claim It
The property must be acquired and placed in service after January 19, 2025. Proper documentation matters: purchase records, in-service dates, and clear asset classification. For larger projects, a cost segregation study adds rigor to the claim and helps maximize the eligible amount. The deduction is reported on IRS Form 4562.
One important caveat: state tax conformity varies. Some states follow federal bonus depreciation rules automatically. Others do not, meaning the state-level treatment of the deduction may differ from the federal treatment. A qualified CPA should review the specific state implications for any project before filing.
Stacking With Other Incentives
Bonus depreciation does not preclude other incentives on the same project. Utility rebates for LED upgrades reduce project cost before the depreciation base is calculated. In some cases, and with proper tax guidance, elements of a project may also qualify for the Section 179D energy efficiency deduction alongside bonus depreciation, though the interaction requires careful structuring.
The energy savings from a modern LED lighting system compound the financial return further. Lower electricity costs over the life of the system add to the front-loaded tax benefit, improving the overall return on the investment.
A Smarter Way to Invest in Lighting
100% bonus depreciation turns a high-quality lighting project from a long-term capital commitment into an immediate tax event. The investment leaves the balance sheet faster. The deduction arrives sooner. And the lighting itself, designed well, earns its return through the experience it creates every day.
At CLI Design, we work with restaurant groups, fitness operators, retailers, and hospitality brands on lighting that serves both the guest experience and the bottom line. If you are planning a build-out or renovation, this is a good time to understand what your lighting investment can do on both fronts. Contact CLI Design to discuss your next project.
Gabriella Halcovich is the National Account Manager at Commercial Lighting Industries, specializing in commercial lighting solutions for hospitality, restaurant, retail, and architectural projects nationwide. She partners with architects, interior designers, and developers to deliver lighting that brings spaces to life.
