We’re continuing our blog series on the One Big Beautiful Bill Act (“OBBBA”), focusing on bonus depreciation. To read more about how the OBBBA affects state and local tax (“SALT”) deductions, see What the One Big Beautiful Act Means for You: SALT. The OBBBA, signed on July 4, 2025, reshapes bonus depreciation and opens fresh planning angles for businesses and advisors. Here’s a concise guide to what changed, what stayed the same, and how to plan.
Pre-OBBBA Framework
- Under prior rules, businesses could claim 100% bonus depreciation on qualifying property acquired and placed in service after late 2017 and before 2023.
- The percentage then began phasing down by 20 percentage points annually: 80% (2023), 60% (2024), 40% (2025), 20% (2026), and 0% thereafter.
- Bonus depreciation applied to both new and used qualifying property.
OBBBA Framework
- Restores and makes permanent 100% bonus depreciation for assets placed in service after January 19, 2025.
- Broadens what counts as qualifying property, including specified categories such as certain sound production equipment and particular nonresidential real property meeting defined criteria.
- Creates a new “qualified production property” pathway for certain nonresidential real property with all of the following features:
- Original use begins with the taxpayer;
- Construction starts after January 19, 2025, and before January 1, 2029;
- Property is placed in service after July 4, 2025, and before January 1, 2031;
- Property is located in the United States or a U.S. territory; and
- Taxpayer must make an affirmative election to treat the property as bonus‑eligible.
Planning Opportunities to Consider
- In‑service Timing in 2025: For assets bought early in 2025, the placed‑in‑service date determines which percentage applies.
- Section 179 vs. Bonus Depreciation: Model the interaction between immediate expensing elections and bonus depreciation to optimize taxable income, basis outcomes, and potential qualified business income deductions. The right mix can shift year‑by‑year.
- Manufacturing and Facility Projects: The ability to fully write off certain facilities (subject to the new criteria) creates opportunities to structure construction starts and placed‑in‑service dates for maximum acceleration.
- Cost Segregation: Expanded eligibility heightens the value of cost segregation to identify components that qualify for faster recovery or bonus treatment. Coordinate engineers, tax, and fixed‑asset teams early.
- Elections and Documentation: For qualifying nonresidential real property, calendar the required election and assemble proof of construction dates, original use, and location to support treatment.
Key Takeaways
- The OBBBA largely restores and stabilizes 100% bonus depreciation for assets placed in service after January 19, 2025.
- A new elective category for certain nonresidential real property can supercharge capital planning—if timeline and qualification details are met.
Conclusion
With permanence restored for many assets and a new pathway for qualified production property, the OBBBA turns bonus depreciation back into a powerful lever for tax‑efficient growth—and a prime area for proactive planning. If you have questions about how these updates might impact your taxes, finances, business, Montgomery Legal is here to help you navigate the evolving tax environment.
Contact Montgomery Legal today to discuss your estate planning needs. Schedule a Consultation or call (214) 432-6100.
