Written by: Markaylin Milburn
The One Big Beautiful Bill Act (OBBBA) is a federal law signed by President Donald Trump on July 4, 2025. This legislation introduces major tax reforms affecting individuals and businesses alike. While the act contains various provisions, this article focuses on Section 70301, which establishes full expensing for certain business property, allowing companies to immediately deduct the cost of qualifying assets rather than depreciating them over time.
Section 70301 introduced a highly anticipated tax provision allowing immediate expensing through 100% bonus depreciation on qualifying business property (Source: H.R.1 – One Big Beautiful Bill Act). Previously, this full bonus depreciation was set to phase out by 2027, but the act permanently reinstates it. New and used qualified business property acquired and placed in service after January 19, 2025, is eligible for this immediate write‑off. Eligible assets include five, seven, and fifteen-year property such as office equipment, furniture, and qualified improvement property. Used property qualifies if the taxpayer did not use the property at any time before acquiring it (Source: Thomson Reuters-Bonus Depreciation). Commercial and residential buildings are excluded. This change significantly benefits business owners looking to expense newly purchased business property rather than depreciating them over time. This is not limited to any specific business; all business types are eligible.
Below are examples of qualified business property for bonus depreciation treatment (Source: Thomson Reuters-Bonus Depreciation):
- Tangible property subject to MACRS with a recovery period of 20 years or less. This includes items such as equipment, machinery, and furnishings.
- Computer software that is acquired, developed, or produced for use in the business.
- Qualified improvement property (QIP) – This includes interior improvements to non-residential buildings, excluding elements like elevators.
- Land improvements such as landscaping, paving, fencing, signage, lighting, and driveways.
Prior to the introduction of Section 70301, the maximum allowable bonus depreciation for assets in 2025 was limited to 40% of the asset’s cost. Consequently, new and used qualified business property acquired and placed in service between January 1, 2025, and January 18, 2025, remain eligible only for the 40% bonus depreciation allowance. Businesses could utilize Section 179 as an alternative for assets purchased during this timeframe, which permits accelerated depreciation within certain limitations. While this option remains available, the 100% bonus depreciation provision offers a more advantageous approach for most business owners. (Source: IRS-How to Depreciate Property).
Although many business assets qualify for the 100% bonus, it is important to note that passenger automobiles (commonly referred to as luxury vehicles) are subject to specific limitations. For vehicles placed in service in 2025, the maximum bonus depreciation allowed is $20,200. Additional limitations apply if the vehicle is not used exclusively for business purposes. (Source: CCH-Depreciation Limitations).
Staying informed about legislative changes like the One Big Beautiful Bill Act is essential for making strategic business decisions and maximizing available tax benefits. These provisions can significantly impact your financial planning and understanding them ensures your business remains compliant while taking full advantage of opportunities. Contact our office if you would like to discuss this subject further. We appreciate the opportunity to guide you through these complex changes to help achieve your goals.
References:
(Source: H.R.1 – One Big Beautiful Bill Act)
https://www.congress.gov/bill/119th-congress/house-bill/1/text
(Source: CCH-Depreciation Limitations) https://answerconnect.cch.com/topic/eabe048e7d141000874990b11c2ac4f102/depreciation-limitations-recapture-and-lease-inclusion-amounts-for-passenger-automobiles-and-other-listed-property?searchId=2899320360
(Source: Thomson Reuters-Bonus Depreciation) https://tax.thomsonreuters.com/en/glossary/bonus-depreciation
(Source: IRS-How to Depreciate Property) www.irs.gov/publications/p946