If you own a small business, there’s exciting news on the tax front. The recently enacted One Big Beautiful Bill Act (OBBBA) introduces powerful updates to how businesses can depreciate eligible assets—most notably, a permanent return of 100% first-year bonus depreciation and expanded Section 179 expensing. Here’s how these favorable changes can boost your bottom line and help you plan smarter for the years ahead.
Full Reinstatement of 100% Bonus Depreciation
Under the OBBBA, 100% first-year bonus depreciation is back—and it’s here to stay. Businesses can now fully deduct the cost of qualifying property acquired and placed in service after January 19, 2025.
This marks a significant change from previous law, where bonus depreciation was being phased out:
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80% in 2023
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60% in 2024
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40% from Jan 1 to Jan 19, 2025
For certain assets classified as long-production-period property, these phaseouts were delayed, but they too now benefit from the updated 100% provision.
Eligible assets include:
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Most depreciable personal property (e.g., machinery, equipment, computers, vehicles)
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Commercial software
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Qualified Improvement Property (QIP) – improvements made to the interior of non-residential buildings, excluding building enlargements, elevators/escalators, or structural components
Section 179 Expensing: Limits Doubled
The OBBBA also doubles the Section 179 limit for tax years beginning in 2025:
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New maximum deduction: $2.5 million (up from $1.25 million)
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Phase-out threshold: $4 million (up from $3.13 million)
Both limits will be adjusted annually for inflation beginning in 2026.
Section 179 allows businesses to immediately deduct the full cost of qualifying equipment or property in the year it’s placed in service. Qualifying property includes:
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Equipment and software
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QIP (interior improvements of non-residential buildings)
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Roofs, HVAC systems, fire and security systems for non-residential buildings
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Furnishings and equipment used in lodging operations
Heavy SUV Cap: For vehicles over 6,000 pounds but under 14,000 pounds, the Section 179 deduction is capped at $31,300 for 2025.
📝 Tax Planning Tip: While both Section 179 and bonus depreciation can be useful, bonus depreciation typically has fewer limitations and is often preferred—especially for pass-through entities like partnerships and S corporations.
Special 100% First-Year Deduction for Qualified Production Property (QPP)
Another game-changer: the OBBBA now allows 100% first-year depreciation for Qualified Production Property (QPP). This applies to non-residential real estate used directly in manufacturing, refining, or production activities.
What qualifies as QPP?
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Industrial or manufacturing buildings
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Properties used directly in creating tangible personal goods
Exclusions: Office space, administrative functions, R&D, parking, software development, and lodging uses do not qualify.
Eligibility Timeline:
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Construction must begin after January 19, 2025
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Must be placed in service before 2031
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Property must be located in the U.S. or a U.S. territory
This provision is designed to boost U.S.-based production and encourage long-term investment in manufacturing infrastructure.
Don’t Miss Out on These Tax-Saving Opportunities
These depreciation-related changes under the OBBBA could dramatically impact your tax planning strategy—especially if you’re planning major purchases or facility upgrades. Whether you’re investing in new equipment, upgrading commercial space, or expanding production capabilities, the enhanced first-year deductions can lead to significant tax savings.
Need Help Navigating These Changes?
Tax laws are complex—and every business situation is unique. If you’re planning to invest in assets or property in the near future, our team can help you strategically maximize your deductions under the OBBBA’s new provisions.
Let us help you unlock the full potential of these new tax incentives for 2025 and beyond.
