OBBB Restores 100 Percent Bonus Depreciation and Expands Section 179

When it comes to managing your business’s tax burden, the timing and method of depreciating property can make a significant difference. Cash flow is an integral part of every business and, for a business owner, taxes are one of the biggest expenses they will have. The One Big Beautiful Bill Act (OBBB), signed into law July 4, 2025, restores 100 percent bonus depreciation for qualifying property placed in service after January 19, 2025, reversing a scheduled phase-down that had narrowed this accelerated deduction.

This change, along with an increase in Section 179 deduction limits and new rules for certain production property, offers a range of opportunities to reduce taxable income and improve cash flow. Understanding how these provisions apply to your business situation and when to act can position you to optimize these updated rules.

Expanded Depreciation and Expensing Rules Provide Flexibility

Under OBBB, 100 percent bonus depreciation is back for qualifying property acquired and placed in service after January 19, 2025. This reverses the prior scheduled reduction to 40 percent, allowing you to write off the full cost of eligible assets in the year they are placed in service. This benefit applies broadly across industries and asset types—including equipment and more.

Section 179 expensing limits for the 2025 tax year set the maximum deduction at $2,500,000. The deduction begins to phase out when qualifying equipment purchases exceed $4,000,000. For every dollar spent above this threshold, the maximum deduction is reduced by one dollar. The phaseout is complete at $6,500,000, i.e., $4,000,000 plus $2,500,000, in total acquisitions, after which the Section 179 deduction is no longer available. These limits will be indexed for inflation starting in the 2026 tax year. Such adjustments can improve cash flow and reduce taxable income, especially for businesses making significant capital investments.

A notable addition is the Qualified Production Property (QPP) provision, which allows full expensing for certain nonresidential real property used in specific production industries such as manufacturing, agricultural processing, and refining. This opportunity shortens what was previously a 39-year depreciation period to a single year, but it requires that the property meet strict timing and usage criteria.

Given the complexity and evolving nature of these rules and the fact that additional IRS guidance is still pending, reviewing your capital investment plans and working closely with your tax advisor is crucial to ensure you maximize available deductions and optimize your tax position.

How We Help

AAFCPAs supports business owners in navigating complex depreciation and expensing rules to optimize tax benefits and cash flow. Our team offers technical guidance on bonus depreciation, Section 179 expensing, and emerging provisions like Qualified Production Property to help you make informed decisions about capital investments.

We work closely with your internal teams and advisors to review your asset acquisition plans and apply tax strategies that preserve working capital while ensuring compliance. With AAFCPAs, you gain a partner that stays ahead of evolving regulations and provides customized advice aligned with your business objectives.

These insights were contributed by Matthew Lougee, CPA, MSA, Director, Tax.

Questions? Reach out to our author directly or your AAFCPAs partner.

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