If you plan to buy equipment, furniture, computers, and other personal property for your business, the One Big Beautiful Bill Act (OBBBA) delivers great news. You can now deduct the full cost of such property in a single year—without limit.
For manufacturers, the OBBBA goes even further by creating a new 100% deduction for factories and other production-related real estate.
100% Bonus Depreciation Returns:
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% for property acquired and placed in service on or after January 20, 2025. Previously, bonus depreciation had dropped to 60% in 2024 and fell to 40% from January 1 through January 19. The new law makes the 100% 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 create a loss. You can carry unused deductions forward to future years. If you prefer not to use bonus depreciation, 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 phase-out beginning at $4 million of total property placed in service.
Because of the new, permanent 100% bonus depreciation, most businesses will rely less on Section 179. Unlike bonus depreciation, Section 179
· requires business use of at least fifty-one percent (51.0%),
· cannot create a loss, and
· carries annual caps.
However, Section 179 allows you to pick and choose specific assets to expense, which can be beneficial for planning purposes. You also need to be aware that many states impose limitations on Section 179 expensing.
New Deduction for Qualified Production Property:
The OBBBA also created a temporary 100% 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.
If you would like to discuss the OBBBA depreciation rules, please call our offices at 800-321-0763 or email us at: cs1@.tippingtax.com to discuss further.