Bonus Depreciation and the OBBBA
The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, makes 100% bonus depreciation permanent for assets placed in service after Jan. 19, 2025, and expands eligible property categories — offering new planning opportunities for tax professionals.
David A. Crumbaugh, CPA-Austin
Overview
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, provides changes to the rules of bonus depreciation that offer professionals many planning opportunities.
Current Law: Bonus Depreciation
Under the Tax Cuts and Jobs Act (TCJA) of 2017, businesses can claim 100 percent bonus depreciation on qualified property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023.
The bonus depreciation percentage is scheduled to phase down after 2022 by 20 percentage points each year: 80 percent in 2023, 60 percent in 2024, 40 percent in 2025, 20 percent in 2026, and 0 percent thereafter.
Bonus depreciation applies to new and used property that meets certain requirements.
OBBBA and Bonus Depreciation
The OBBBA includes the following provisions:
Making the 100 percent bonus depreciation permanent for assets placed in service after Jan. 19, 2025.
Expanding the categories of qualified property eligible for bonus depreciation.
A new asset category eligible for qualified production property (nonresidential real property that meets specified requirements) placed in service between July 4, 2025, and before Jan. 1, 2031:
Original use starts with the taxpayer.
Construction begins after Jan. 19, 2025, and before Jan. 1, 2029.
Placed in service after July 4, 2025 (date of enactment) and before Jan. 1, 2031.
Must be in the United States or a U.S. territory.
Will require the taxpayer to make an election designating the property as qualifying for bonus depreciation.
Differences from Current Law
Aspect | Current Law (TCJA) | OBBBA |
Bonus Depreciation Rate | 100 percent through 2022; phased down through 2026 | 100 percent (for assets in service after Jan. 19, 2025) |
Eligible Property | Qualified new and used property (usually with a recovery period of 20 years or less) | Expanded to include qualified sound production equipment and nonresidential real property meeting specific requirements |
Acquisition Rules | Excludes property acquired from related parties | May still change, depending on guidance from IRS |
Effective Dates | Phased sunset by 2027 | Mostly permanent for assets in service after Jan. 19, 2025, except for nonresidential real property |
Planning Opportunities
The provisions on bonus depreciation in the OBBBA allow professionals to offer ample planning opportunities. Professionals should consider the asset’s date in service to determine what rules apply if purchased in January 2025. In addition, assets in service post Jan. 19, 2025, should be reviewed to determine how to balance Section 179 and bonus depreciation to maximize the Section 199A qualified business income deduction. Also, for those in the manufacturing industry, allowing for full write off of facilities gives multiple opportunities for professionals to consult on timing and tax savings on constructing new buildings. The new rules also will add to the benefits of recommending cost segregation studies.
Conclusion
The OBBBA makes permanent bonus depreciation rules introduced in the TCJA that benefitted many businesses. Over the next few years, professionals have many opportunities to be a big value-add for their clients by maximizing the benefits of this provision.
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