Businesses can now take higher deductions thanks to the One Big Beautiful Bill Act (OBBBA) increasing the limits on bonus depreciation and Section 179 expensing. These tax incentives allow eligible assets to be expensed fully (or mostly) instead of being depreciated over several years.
Under the new law, businesses can expense up to $2.5 million in qualifying assets under Section 179, with the deduction phasing out dollar-for-dollar once total purchases exceed $4 million. These updated thresholds apply to assets placed in service after December 31, 2024, and will be adjusted for inflation in future years. Qualifying Section 179 assets include tangible personal property, off-the-shelf software, and certain improvements to nonresidential real property, such as roofs, HVAC systems, fire alarm systems, and security systems.
The Act also reinstates 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. Any purchases placed in service between January 1 and January 19, 2025, are subject to the prior law, which allows 40% bonus depreciation (down from 60% in 2024). If there is a binding contract in place before January 20, 2025, to acquire the property, the asset does not qualify for the 100% bonus rate and instead follows the older phase-down schedule.
Qualifying assets for bonus depreciation include property with a MACRS recovery period of 20 years or less, interior improvements to nonresidential real property, and qualified production property (QPP) — which includes newly constructed or certain existing nonresidential real estate used for manufacturing, production, or refining of tangible personal property in the U.S.
