The One Big Beautiful Bill Act (OBBBA) includes a number of favorable changes that will benefit small business taxpayers. At the top of the list is the return of 100% bonus depreciation in 2025—a major incentive for those planning to invest in business equipment, technology, and certain real estate improvements.
100% Bonus Depreciation is Back for 2025
The new law permanently restores 100% bonus depreciation for eligible assets acquired and placed in service after January 19, 2025. This is a significant shift from previous rules:
- 100% bonus depreciation was last allowed in 2022.
- It was reduced to 80% for 2023, 60% for 2024, and 40% for early 2025 (assets placed in service between Jan. 1 and Jan. 19).
- For certain long-production-period property, these cutbacks were delayed by one year.
What Assets Qualify for 100% Bonus Depreciation in 2025?
Eligible property includes most depreciable personal property such as:
- Equipment
- Computer hardware and software
- Certain vehicles
- Qualified Improvement Property (QIP) for non-residential buildings (interior improvements only)
QIP does not include expenditures for expanding a building, internal structural frameworks, or installing elevators or escalators—these items must generally be depreciated over 39 years.
Increased Section 179 Expensing Limits for 2025
In addition to the return of full bonus depreciation, the OBBBA expands the Section 179 first-year expensing limits:
- The maximum deduction rises to $2.5 million (up from $1.25 million).
- The phase-out threshold increases to $4 million (up from $3.13 million).
- These amounts will be adjusted annually for inflation beginning in 2026.
Section 179 applies to the same types of assets as bonus depreciation and also includes:
- Roofs, HVAC systems, fire protection and security systems (non-residential real estate)
- Personal property used in furnishing lodging
- Qualified Improvement Property (up to the Section 179 cap)
A special limit applies to heavy SUVs (6,001–14,000 pounds). For 2025, the maximum deduction for these vehicles is $31,300.
Which Is Better: Bonus Depreciation or Section 179?
While both offer valuable deductions, 100% bonus depreciation in 2025 comes with fewer limitations than Section 179, especially for businesses structured as partnerships, LLCs, or S corporations. Most tax professionals recommend using bonus depreciation first when possible, and reserving Section 179 for assets not eligible or to fill in remaining tax planning gaps.
New 100% Depreciation for Qualified Production Property (QPP)
The OBBBA also introduces a brand-new tax break: 100% bonus depreciation for Qualified Production Property (QPP), which includes buildings used directly in manufacturing, refining, or producing tangible personal property.
Requirements include:
- Construction must begin after Jan. 19, 2025, and before 2029.
- The property must be placed in service in the U.S. (or a U.S. possession) before 2031.
QPP does not include office space, administrative areas, lodging, or other unrelated uses.
Final Thoughts
The return of 100% bonus depreciation in 2025, expanded Section 179 limits, and new QPP rules present major planning opportunities for small businesses. These provisions can significantly reduce taxable income and improve cash flow. See what other provisions are included in the OBBBA in this post.
Let’s talk about how you can take advantage of these powerful deductions and other tax-saving strategies as you plan for 2025 and beyond.
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