Thanks to the 2025 tax law, businesses now have two powerful ways to write off equipment and improvements immediately. Choosing the right one, or combining them, can make a big difference to your tax bill and your state taxes.
Section 179 and bonus depreciation both let a business deduct the cost of qualifying assets in the year they're placed in service, instead of depreciating them over several years. Under the One Big Beautiful Bill Act of July 2025:
| Section 179 | Bonus depreciation | |
|---|---|---|
| Annual cap | About $2.5M (indexed), reduced once purchases exceed about $4M | No dollar cap |
| Income limit | Limited to taxable business income; excess carries forward | No income limit; can create or increase a loss |
| How it's applied | Elected asset by asset, so you can pick and choose | Applies automatically to a whole class of property unless you elect out |
| Building improvements | Can cover qualified improvement property, plus roofs, HVAC, fire protection and security systems on non-residential buildings | Covers qualified improvement property and 5-, 7- and 15-year property (including items identified by cost segregation) |
| Used property | Yes | Yes, if you didn't previously use it |
| State conformity | Most states follow it, often with their own limits | Many states don't conform |
You don't have to choose just one. A common approach is to take Section 179 on selected assets first, then let bonus depreciation cover the rest. It's also worth asking whether deducting everything this year is really best. If you expect higher income next year, spreading deductions could save more over time.
The 2025 law also created an elective 100% deduction for qualified production property: certain newly constructed non-residential buildings used in manufacturing, production or refining, with construction beginning after January 19, 2025 and before 2029. It's a potentially large opportunity for industrial owners, with specific requirements that need careful review.
Planning a major purchase or renovation? The best time to decide between these is before year-end. Learn more about our TAXATION Services service or book a free consultation.
This article is general information, not tax, legal or accounting advice. Tax rules change and outcomes depend on your specific facts; speak with a qualified tax professional before acting.
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