For those managing taxes for companies or advising business clients, 2025 brings a significant shift in how capital investments can be deducted. With the passage of the One Big Beautiful Bill Act (OBBBA), Congress has expanded Section 179 deductions and permanently restored 100% bonus depreciation for eligible property placed in service after January 19, 2025.

These changes can transform year-end planning, equipment purchase strategies, and cash flow management. This post walks through what’s new, how to apply it, and how tax teams should lead the conversation internally.

Expanded Section 179 Limits

Under OBBBA, the Section 179 expensing limit jumps significantly for property placed in service in 2025:

• **New maximum deduction: $2,500,000 

• **Phase-out threshold: begins at $4,000,000 in total qualifying purchases

• **The deduction phases out dollar-for-dollar above the threshold.

• **These enhanced limits are effective for tax years beginning after December 31, 2024.

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Because of this expansion, many more capital investments in 2025 may qualify for full or near-full expensing under Section 179.

Restoration of 100% Bonus Depreciation

Previously, bonus depreciation was phasing down: 60% for 2024, 40% for 2025, and eventually to zero under the TCJA schedule.

Under OBBBA:

• **100% bonus depreciation is permanently reinstated for qualified property acquired after January 19, 2025 and placed in service thereafter.

• **Taxpayers may elect to use a lower percentage (e.g. 40%) for the first year for certain property classes, providing some flexibility.

• **The restoration applies to both new and used property (so long as it meets acquisition/use requirements) for most tangible personal property with a recovery period of 20 years or less.

• **Some transition rules apply for assets acquired under binding contracts before January 19, 2025.

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In practical terms, most businesses will apply Section 179 first (for assets and improvements eligible under that section), then apply bonus depreciation to remaining qualified purchases.

Because both provisions allow for accelerated or immediate expensing, understanding their interplay is critical:

1. **Apply Section 179 first. Deduct up to the $2.5M limit (subject to business income limits and phase-out).

2. **Then apply bonus depreciation to remaining qualified property that wasn’t expensed under Section 179.

3. **Section 179 is limited by taxable income from active business operations; bonus depreciation is not so limited.

4. **Some assets or improvements might qualify under one but not the other; careful asset classification is key.

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6. Because bonus depreciation is now permanent under OBBBA, the need to choose between the two is reduced—but applying both strategically may still yield optimal results.

Eligible Property

**Typical qualifying assets include:

• **Machinery, equipment, computers, and tangible business assets

• **Off-the-shelf software

• **Office furniture

• **Improvements to nonresidential buildings: roofs, HVAC, security/fire protection systems, etc. (if eligible under Section 179)

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• Certain real property improvements and qualified production property under new rules (see below)

Qualified Production Property (QPP) & Real Property Enhancements

OBBBA introduces or expands allowances for qualified production property (certain nonresidential real property used in manufacturing/production activities) to be expensed under accelerated rules.

Also, for improvements to non-residential property (roofs, HVAC, fire/security systems), Section 179 eligibility becomes more useful when those improvements do not qualify for bonus depreciation or when you want more control over expensing. 

Use Requirement & Limitations

• **The property must be used more than 50% for business.

• **The deduction is prorated if use is less than 100%.

• **Section 179 is not available if business use is 50% or less.

• **The Section 179 deduction cannot exceed taxable income from the active trade or business (though unused portions carry forward).

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• Special rules apply for vehicles and trucks (especially SUVs) — weight limits, caps, and business-use constraints.

The changes to Section 179 and bonus depreciation in 2025 open the door for significant tax savings, but how your company applies them will depend on your specific financial situation. Every organization’s capital plan, income forecast, and state tax obligations are different.

That’s why this is the right time to bring the topic to your internal finance and tax experts, or your outside accounting firm, so they can evaluate how these rules affect your business strategy. Opening the conversation early ensures that major purchase decisions, budgeting, and year-end planning align with the updated tax code.

In short, don’t wait until tax season, reach out to your internal teams and trusted advisors now to confirm the best approach for your company.

Disclaimer: This blog post is intended for informational purposes only and should not be considered legal, tax, or accounting advice. The information provided is based on publicly available sources as of 2025 and may not reflect future updates or individual circumstances. Readers should consult their company’s finance team, tax department, or qualified tax professional before making decisions regarding Section 179 deductions, bonus depreciation, or any other tax strategies. We disclaim any liability for actions taken based on this content.