Breaking Down the OBBBA: Accelerated Depreciation Opportunities in 2025 and Beyond

The “One Big Beautiful Bill Act” (OBBBA), signed on July 4, 2025, provides businesses with more flexibility than they’ve had in years when it comes to recovering capital expenditures. By doubling §179 expensing limits and reinstating permanent 100 percent bonus depreciation, Congress sharpened tools that can dramatically improve after-tax cash flow. 

However, with more choice comes more complexity. These provisions aren’t just about taking the biggest deduction available; they’re about timing, sequencing, and aligning depreciation with your broader business strategy. 

One thing is certain: 2025 will be a pivotal year for tax planning. Here’s how businesses can think about the two dominant tools: 

§179 Expensing: Targeted Flexibility 

Section 179 allows businesses to immediately expense qualifying property—i.e., tangible personal property, certain software, and elected “qualified real property” improvements (such as roofs, HVAC, fire protection, and security systems). 

What changed under OBBBA: 

• The annual limit for expensing qualifying property under §179 doubled to $2.5 million, with phase-out starting at $4 million and full elimination at $6.5 million. This increase is effective for assets placed in service for tax years beginning after December 31, 2024.  

• All members of a controlled group of corporations are treated as a single taxpayer for §179 purposes. In practice, this means that corporations must review the aggregation rules carefully to determine whether they should combine related parties when applying the §179 limits. Keep in mind that these limitations apply at both the entity level and the individual level.  

• These thresholds will be adjusted for inflation beginning in 2026. 

Tax Planning Tips: 

For businesses making capital investments below the annual phase-out amounts, §179 provides predictable and targeted write-offs. 

• This is especially valuable for owners improving their own facilities—certain real property improvements often don’t qualify for bonus depreciation, but they can qualify for immediate write-off under §179. 

• Section 179 contains a taxable income limitation that makes this deduction most useful for profitable, active businesses looking to shelter current-year income, rather than for businesses operating at a loss. 

• A business can choose to apply §179 to certain classes of qualifying assets, rather than to all of them, to better manage current-year depreciation expenses. 

• Many states decouple from federal §179 rules, so a deduction that creates a benefit on the federal return may not carry through at the state level.  

Bonus Depreciation (§168(k)): A Heavy-Hitter Tool 

Bonus depreciation has been a moving target for two decades. As a result of OBBBA, it’s now permanently back at 100 percent for qualifying property acquired after January 19, 2025, and it is not scheduled to expire. 

Key features: 

• Covers property with a recovery period of 20 years or less, including land improvements, such as sidewalks and parking lots. 

• Applies to both new and used property (if acquired from an unrelated party). 

• Unlike §179, does not have dollar limits or income caps. 

Why it matters:  

• Bonus depreciation shines in big-ticket acquisitions—particularly in business asset acquisition deals, where the buyer can immediately write off machinery and equipment costs. 

• Because bonus depreciation has no phase-out or income restrictions, it can create or expand net operating losses—creating a planning opportunity for businesses. 

• Timing is critical. Assets acquired before January 20, 2025, will not qualify for 100 percent bonus depreciation, making the acquisition rules especially important for cases in which timing is in question. For property acquired after January 19, 2025, a written binding contract date controls eligibility, meaning that the business is considered to have “acquired” the property on the date it signs a binding contract for the acquisition. Understanding and documenting the effective date of a binding contract is essential to determining the correct amount of bonus depreciation. Further Internal Revenue Service (IRS) guidance is expected, but in the meantime, you should review binding contract situations carefully with your tax advisor. 

• The acquisition date rules also extend to self-constructed assets, raising questions about whether outsourcing part of a build impacts its status as “self-constructed” and when exactly the acquisition date is established. There may be opportunities here: certain components of a self-constructed asset acquired after January 19, 2025, could still qualify for 100 percent bonus depreciation. A careful review of these rules may open the door to additional deductions. 

Comparing §179 and Bonus Depreciation 

Although both provisions accelerate deductions, they’re best suited to different situations: 

• §179: Ideal for active businesses that have capital expenditures under the phase-out thresholds and need targeted write-offs, especially for improvements to owned facilities.  

• Bonus Depreciation: Best for high-dollar acquisitions, businesses in loss positions, and property not eligible under §179 (e.g., land improvements). 

Some taxpayers will use a blend: maximizing §179 first (subject to caps and income limits), then applying 100 percent bonus depreciation to the remaining basis. 

The chart below highlights the key differences between §179 expensing and 100 percent bonus depreciation, helping taxpayers determine which approach—or combination—may best fit their situation. 

Comparison Chart of Key Selected Depreciation Issues:   

§179 Expensing vs. 100 Percent Bonus Depreciation (2025)   

Tax Planning Tips: 

1. Timing Matters 

Property acquired prior to January 20, 2025, will not qualify for 100 percent bonus depreciation unless one of the exceptions applies. Businesses should review the specific rules to determine if they might still qualify for the 100 percent benefit, or look to §179 if it is available.  

2. State Conformity Isn’t Uniform 

Some states fully adopt these federal changes, others impose caps on the depreciation deductions, and still others “decouple” from the federal rules. Modeling both federal and state depreciation is essential, especially for multi-state businesses. 

3. Bracket Management 

If you expect to be in a much higher tax bracket in 2026 or after than you were in 2025, deferring deductions may save you more in the long run. In those cases, “electing out” of bonus depreciation or not electing to apply §179 across asset classes may make sense. 

4. Grouping Elections Can Unlock Losses 

Business owners that have both operating companies and real estate entities meeting the self-rental rules may benefit from certain “grouping elections,” allowing depreciation-driven real estate losses to offset active business income. Business owners must evaluate these elections carefully to see if they are eligible for the election and if it is beneficial to make the election. 

5.  Documentation Is Non-Negotiable 

For assets acquired either prior to or after January 19, 2025, taxpayers will need to document the acquisition date and evaluate whether exceptions—such as the binding contract rules or self-construction rules—could allow the asset to qualify for 100 percent bonus depreciation. Auditors will closely scrutinize invoices, placed-in-service records, election statements, usage logs, and other records, making accurate recordkeeping more important than ever. 

Key Takeaways 

The OBBBA’s permanent §179 rule and reinstated 100 percent bonus depreciation are more than compliance changes—they’re strategic levers. When deployed thoughtfully, they can reduce financing needs, lower interest costs, and improve cash flow. 

The challenge for business owners is more than understanding these definitions—it’s knowing when to accelerate equipment purchases or elect an accelerated write-off versus when to defer them, as well as knowing how to align depreciation with long-term business objectives. 

As a result, 2025 is the year to be intentional about capital expenditure timing and depreciation strategy. If you’re making significant investments, don’t just default to claiming every tax deduction as soon as possible. Plan your approach now to maximize both tax savings and long-term flexibility.  

Finally, if you are considering expanding your manufacturing operations with a new facility, another OBBBA provision may come into play. The new qualified production property (QPP) incentive allows businesses to expense the cost of an entire manufacturing facility immediately, rather than depreciating it over 39 years (as in straight-line depreciation). For more details on the benefits and requirements of QPP, click here.

At Sikich, we don’t see these provisions as “check-the-box” deductions. We see them as opportunities to design a tax position that fosters strategic growth. By working together, we can help you build a depreciation strategy that’s not just technically correct, but strategically powerful. 

This article is part of our continued analysis of the OBBBA. Find all of our coverage here. We also invite you to contact your Sikich tax advisor if you have any questions on how these rules impact your business and its owners. 

About Our Authors

Sean O’Connell, CPA/PFS, CGMA, advises closely-held businesses and their owners on tax, and strategic and financial planning. He specializes in tax opportunities for middle-market companies, estate planning and wealth building.

Tom Bayer, CPA, CExP, has specialized expertise in the areas of business succession planning, tax planning and compliance, and business advisory. He has deep experience providing a range of accounting, tax, and business advisory services to commercial clients across industries.

Glen Birnbaum, CPA, provides expert accounting and tax advisory services for a range of entities, including those in the agriculture, manufacturing and construction industries. He excels in delivering tax and succession planning services to his clients, who value his commitment to strengthening their businesses.

Jim Brandenburg, CPA, MST, possesses extensive experience and knowledge in corporate and partnership tax law, mergers and acquisitions, and tax legislation. His expertise includes working with owners of closely held businesses to identify tax planning opportunities and assist them in implementing these strategies.