What Is 100% Bonus Depreciation Under the OBBBA?

100% Bonus Depreciation Restored

Starting January 20, 2025, and going forward, businesses can again claim 100% bonus depreciation on qualified property. This applies to assets with a useful life of 20 years or less, such as:

• Machinery and equipment
• Office furniture and computers
• Off-the-shelf software
• Land improvements like fencing, driveways, and landscaping
• Interior, non-structural improvements to commercial buildings

What does this mean in practice? If you purchase $100,000 worth of new equipment, you can deduct the entire cost in 2025 instead of depreciating it over 5, 7, or 15 years.

Limits and Exceptions

Bonus depreciation does not apply to land, permanent structures, inventory, or intangible assets like patents. Passenger vehicles are capped at $20,200 for the first year (including an $8,000 bonus depreciation limit). However, heavy vehicles over 6,000 pounds are not subject to the cap, making them popular tax planning tools for contractors and business owners.

Section 179 Deduction Expanded

The OBBBA also raised the Section 179 expensing limit to $2.5 million, up from $1.22 million in 2024. Section 179 and bonus depreciation often apply to the same types of property, but there are key differences:

• Section 179 is capped annually and can’t exceed your business income. You also must claim it on your return.
• Bonus depreciation has no income limit and applies automatically unless you opt out.

Because 100% bonus depreciation is now permanent, many businesses will rely less on Section 179. But Section 179 still has advantages, such as the ability to pick and choose which assets to expense.

New Deduction for Qualified Production Property

Here’s a big new opportunity: the OBBBA created a temporary 100% deduction for qualified production property. This applies to factories and production facilities used in manufacturing, refining, or similar activities. Businesses can deduct the full cost of constructing or purchasing eligible property placed in service between 2025 and 2030.

If you own a manufacturing business or are planning new construction, this deduction could deliver enormous tax savings. Cost segregation studies may help identify which portions of a building qualify for immediate deduction.

Takeaways for Business Owners

• 100% bonus depreciation is now permanent, giving you flexibility to deduct large purchases right away.
• Section 179 expensing limits were expanded, but many businesses will find bonus depreciation more useful.
• The new qualified production property deduction offers a limited-time opportunity for manufacturers.

These rules create planning opportunities—and potential pitfalls if not handled correctly. At Ken-Mar Tax, we help businesses maximize deductions while staying compliant with IRS rules. If you’re considering new equipment, vehicles, or building improvements, schedule a free consultation to find out how 100% bonus depreciation and other deductions could lower your taxes this year.