Immediate deductions are a powerful lever in capital planning, and Congress has just given businesses a larger one. The One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, permanently restores 100% bonus depreciation for qualified property acquired on or after January 20, 2025, and placed in service before 2030, with the full write‑off continuing for future years. This change reverses the phase‑down that was scheduled to take bonus depreciation to 40% for most 2025 purchases and to zero thereafter.
Property that qualifies for the revived 100 percent deduction
The definition of qualified property remains largely the same as during the 2018‑2022 window. Tangible assets with a recovery period of twenty years or less—machinery, computers, office furniture and certain off‑the‑shelf software—can be expensed immediately. Interior, non‑structural improvements to non‑residential real estate – Qualified Improvement Property, (or QIP) remain eligible, a boon for retailers and landlords refreshing store interiors. Used property qualifies as long as the taxpayer’s first use begins with the purchase and the buyer and seller are unrelated. That provision keeps popular sale‑leaseback arrangements and second‑hand equipment acquisitions firmly in play.
Why the contract date matters more than the delivery date
Under OBBBA, the baseline rule is simple: the acquisition must occur on or after January 20, 2025. “Acquisition” is defined by reference to the earliest binding written contract. If a taxpayer signed a purchase order on January 18, that asset likely belongs to the old phase‑down regime even if delivery happens months later. Projects built by the taxpayer follow a similar approach: the acquisition date is the day physical work of a significant nature begins, not the day engineers finish drawings. There is, however, a ten‑% safe harbor. If by the contract date the taxpayer has incurred less than 10% of total expected costs, a post‑January 19 replacement contract resets the acquisition date and unlocks the 100% deduction.
The new §179 limits and how they mesh with bonus depreciation
While bonus depreciation is the headline, §179 expensing—the election to deduct the cost of qualifying property up to a dollar ceiling—also becomes more generous. Beginning in 2025, OBBBA raises the §179 deduction cap to $2.5 million and lifts the phase‑out threshold to $4 million of total annual purchases. Those figures more than double the 2024 limits and will index for inflation after 2026. Unlike bonus depreciation, §179 cannot create a net operating loss; the deduction is limited to the taxpayer’s current‑year business tax income, with any unused amount carrying forward. Accordingly, well‑capitalized businesses that expect profits can still rely on §179 if an asset or state conformity rule blocks bonus depreciation, whereas firms anticipating cyclical losses may prefer the unlimited nature of bonus depreciation.
Qualified Business Income and other collateral effects
Large deductions ripple through the owner’s return. Most pass‑through owners now qualify for a 23% Qualified Business Income (QBI) deduction under §199A. Because that deduction is generally calculated after bonus or §179 deductions, an aggressive write‑off reduces QBI and can lower the absolute dollar value of the 23% benefit. Owners should model whether a slightly smaller equipment deduction today yields a larger overall reduction in combined federal and state tax tomorrow.
Heavy vehicles and the ever‑popular SUV rule
The so‑called SUV loophole survives intact. A pickup or SUV with a gross‑vehicle‑weight rating above 6,000 pounds that is used more than 50% for business remains eligible for either 100% bonus depreciation or §179 expensing, subject to standard listed‑property substantiation. Vehicles below the 6,000‑pound threshold remain capped under the luxury‑auto rules that spread deductions over six years. Businesses choosing an electric heavy‑duty pickup may even stack the bonus deduction with the fading commercial clean‑vehicle credit if the vehicle is placed in service before that credit sunsets at the end of September 2025. Keep a usage log: any future dip below the 51% business‑use line triggers recapture of excess depreciation.
An illustration
Consider ABC Fabrication, which expects $800,000 of taxable income for 2025 before depreciation. In February it buys $2 million of CNC machines and spends $600,000 on QIP for its plant, both under contracts signed on February 1. Under OBBBA, the entire $2.6 million is deductible, dropping taxable income (TI) to a $1.8 million net operating loss. The loss carries forward and can shelter up to 80% of future taxable income. If ABC instead elects §179 up to its $800,000 income limit and depreciates the rest under MACRS, it eliminates current tax while avoiding the NOL and its eighty‑% constraint. The better choice hinges on cash‑flow priorities, projected earnings, and debt‑covenant headroom.
| Election | Federal deduction 2025 | Resulting TI | Notes |
| 100 % bonus on all | $2.6 M | ($1.8 M) NOL | May carry forward at 80 % limit |
| 50 / 50 mix (§179 to income cap) | $800 K | $0 | Remainder §179 carries to 2026 |
| Spread deductions (no bonus) | ~$110 K MACRS | $690 K | Higher current tax but steadier earnings |
Five practical steps before year‑end 2025
- Audit purchase orders and construction agreements to identify contracts dated before January 20; where possible, renegotiate or reissue to shift the acquisition date into the bonus window.
- Map delivery schedules and installation milestones so assets cross the placed‑in‑service finish line before December 31, maximizing first‑year deductions.
- Forecast taxable income under scenarios—full bonus, partial §179, and straight‑line depreciation—to understand effects on estimated payments, bank covenants, and owner distributions.
- Update capitalization and depreciation policies so book and tax records reflect new cost‑recovery methods and auditors understand the divergence.