OBBBA restores 100 percent bonus and enhances Section 179

If you plan to buy equipment, furniture, computers, or other personal property for your business, you can now deduct the full cost of such property in a single year, without limits due to the One Big Beautiful Bill Act (OBBBA). 

For manufacturers, the OBBBA goes even further by creating a new 100 percent deduction for factories and other production-related real estate.

This is all due to the reinstatement of 100% Bonus Depreciation.

Bonus depreciation lets you deduct a property’s cost in the year you place it in service, instead of spreading the deduction over several years. You can apply it to most personal business property, off-the-shelf software, and land improvements such as landscaping.

The OBBBA increases bonus depreciation to 100 percent for property acquired and placed in service on or after January 20, 2025. Previously, bonus depreciation had dropped to 60 percent in 2024 and fell to 40 percent from January 1 through January 19. The new law makes the 100 percent deduction permanent.

This change makes bonus depreciation the primary method for deducting personal property. You may deduct the entire cost of a qualifying property in one year if you use it exclusively for business. The only exception is “listed property”, primarily passenger automobiles, which remain subject to an annual cap of $8,000.

There is no overall limit on bonus depreciation deductions, even if they result in a net loss. You can carry unused deductions forward to future years, and if you prefer not to use bonus depreciation for that tax year, you must opt out for the entire class of assets.

Enhanced Section 179 Deduction

Section 179 expensing overlaps with bonus depreciation but comes with annual limits.

The OBBBA raised the Section 179 limit to $2.5 million for 2025, with a phaseout beginning at $4 million of property placed in service during the year.  Even with these enhancements, most businesses will likely rely less on Section 179 due to the 100 percent bonus depreciation.   

Differences that should be highlighted are unlike bonus depreciation, Section 179

• requires business use of at least 51 percent,

• cannot create a loss, and

• carries annual caps. 

  
  

Despite that, Section 179 allows you to pick and choose specific assets to expense, which can be beneficial for planning purposes.

New Deduction for Qualified Production Property

The OBBBA also created a temporary 100 percent deduction for real property used in manufacturing tangible goods, such as factories, refining halls, and assembly lines.

Typically, businesses depreciate such property over a period of 39 years.

Now, you may deduct the entire cost in one year if you build the property between January 20, 2025, and December 31, 2028, and place it in service by January 1, 2031. Specific existing property may also qualify if it was not in service as qualified production property between January 1, 2021, and May 12, 2025.