The recently enacted One Big Beautiful Bill Act (OBBBA) delivers major upgrades to business tax incentives, particularly in the areas of bonus depreciation and Section 179 expensing. These changes are designed to encourage investment in business property by making it easier and more beneficial for businesses to immediately deduct the cost of qualifying assets.
Here’s what you need to know:
Permanent 100% Bonus Depreciation
The OBBBA makes 100% bonus depreciation permanent for qualified property acquired after January 19, 2025. This means businesses can fully and immediately deduct the cost of eligible property in the year it is placed in service, rather than spreading the deduction over several years.
Previously, bonus depreciation was set to decrease to 40% for property acquired during 2025 and set to phase down to 20% in 2026, and fully phase out to 0% in 2027. The new law effectively eliminates that phase-out, offering significant tax-saving potential for qualifying investments.
Expanded Section 179
The maximum amount a business can expense under Section 179 is increased to $2,500,000 per year, up from $1,250,000. The phase-out threshold, where the deduction begins to be reduced, is also impacted. The phase-out threshold is increased to $4,000,000, up from $3,130,000. These more generous limits apply to property placed in service in taxable years beginning after December 31, 2024.
While Section 179 remains limited to your business’s taxable income, other rules including limits for married individual filing separately and certain vehicle restrictions remain the same.
What This Means for Your Business
These changes provide substantial opportunities for businesses to accelerate deductions and reduce taxable income by investing in qualifying property. The permanent 100% bonus depreciation and larger Section 179 limits can significantly improve cash flow and make capital investments more attractive.
If you have questions about how these new rules apply to your business or need assistance with planning your capital expenditures for 2025 and beyond, please contact your Rudler, PSC advisor at 859-331-1717. Our experienced team is here to help you take full advantage of these tax saving opportunities.
Important: These are all new changes, and further guidance from the IRS and Treasury Department is expected. The details may change as new regulations and clarifications are issued. Be sure to consult with your tax advisor to understand how these changes affect your specific situation.
RUDLER, PSC CPAs and Business Advisors
This week's Rudler Review is presented by Alexis Ludtke, CPA and Evan Kandra, CPA.
If you would like to discuss your particular situation, contact Alexis or Evan at 859-331-1717.
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