The One Big Beautiful Bill Act (OBBBA) introduces significant updates to bonus depreciation and cost segregation, creating powerful, new opportunities for businesses to reduce their tax liability and improve cash flow. Most notably, it permanently reinstates 100% bonus depreciation and expands eligibility to new asset categories. These changes make capital investments more tax-efficient and provide clarity for long-term planning. Here’s a breakdown of the most impactful updates introduced by OBBBA, and what they mean for your business.
Key Provisions and Benefits of OBBBA
Permanent Reinstatement of 100% Bonus Depreciation
The OBBBA permanently restores 100% bonus depreciation for qualifying assets acquired and placed in service after Jan. 19, 2025. This change eliminates the phasedown of bonus depreciation introduced in earlier legislation and gives businesses the ability to:
- Immediately deduct the full cost of assets with shorter recovery periods (e.g., 5, 7, or 15-year property)
- Enhanced value of cost segregation studies
- Increase year-one tax savings and improved cash flow
This provision applies to tangible property with shorter recovery periods, including assets identified in cost segregation studies (such as equipment, fixtures, and qualified improvement property).
Applies to Both New and Used Property
Qualifying assets can be either new or used, provided they are acquired and placed in service after Jan. 19, 2025. This expands the access to broader tax planning strategies for a wider range of businesses and investors (e.g., real estate, construction, retail, logistics).
100% Allowance for Qualified Production Property (QPP)
Under a temporary OBBBA provision, certain nonresidential real estate used in manufacturing, refining, or production now qualifies for 100% bonus depreciation. This was previously unavailable for most real property.
To qualify, the property must meet all of the following requirements:
- Construction begins after Jan. 19, 2025, and before Jan. 1, 2029
- It’s placed in service before Jan. 1, 2031
- Located within the U.S.
- Used by the taxpayer for its original productive purpose (portions used for offices, lodging, parking, sales, or other non-productive functions don’t qualify).
This change allows manufacturers to expense certain real estate investments that previously required long depreciation schedules, resulting in substantial year-one tax benefits.
Increased Section 179 Expensing Limits
OBBBA raises the Section 179 deduction limit to $2.5 million, with a phase-out threshold of $4 million (both indexed for inflation). This provides greater flexibility for businesses investing in:
- HVAC systems, fire protection, and security equipment
- Office furniture and fixtures
- Tangible personal property used in rental activities
Section 179 offers a simple and immediate way to fully expense qualifying purchases, particularly for businesses with smaller-scale investments that may not use bonus depreciation, or who may be subject to state depreciation rules that differ from the new federal rules.
Strategic Use of 1031 Exchanges
The ability to combine cost segregation with 100% bonus depreciation also strengthens the tax efficiency of 1031 like-kind exchanges relating to the additional tax basis of replacement property.
Next Steps for Business Leaders
To make the most of the OBBBA updates, business owners and finance leaders should:
- Review recent and upcoming capital investments to identify eligible assets
- Engage a cost segregation specialist to support accelerated depreciation
- Work with your tax advisor to align your 2025 strategy with the new provisions
The earlier you plan, the more opportunity you’ll have to reduce tax liability and improve cash flow.
Ready to Maximize Your Tax Strategy?
Our team of tax advisors can help you assess eligibility, identify overlooked opportunities, and develop a depreciation strategy tailored to your business goals. Whether you’re expanding operations, renovating property, or investing in equipment, now is the time to take full advantage of the OBBBA provisions. Schedule a consultation today.
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