The One Big Beautiful Bill Act (OBBBA) aims to spur business investments in the economy by allowing for greater tax breaks for acquisitions and certain building projects. You may even be able to claim the breaks for things you did earlier in 2025, before the new law was passed. But not all the news from the new law is good news…
Bonus depreciation
Bonus depreciation (which the IRS calls the “special depreciation allowance”) is a first-year deduction for a percentage of the cost of buying equipment, machinery, and other qualified property. The percentage was 100% before 2023, but decreased in 2023 to 80% and in 2024 to 60%. Under the new law, the 100% rate permanently applies to qualified property placed in service on or after January 19, 2025. If property was placed in service between January 1 but before January 19, the rate is 40%.
Note: Special rules for bonus depreciation apply to the purchase of vehicles not discussed here.
Impact: If you can use this deduction (and other write-offs discussed below as well as other provisions in the new law), you can reduce your tax bill accordingly. But as they say in commercials: “but wait, there’s more.” To the extent this and other write offs can be used, they may entitle you to claim more of other deductions that have an income base or threshold. Examples:
- Interest expense limitation. To the extent you are subject to the interest expense limitation (you’re not a small business or a real estate or farming business that elected out of the limit), the write-offs reduce adjusted taxable income (ATI), with is the basis for figuring the interest expense limitation.
- Qualified business income (QBI) deduction. The lower your taxable income, the greater your deduction will be if your taxable income is over the initial threshold amount applicable to your filing status. In fact, even if you thought you’d be fully phased out for the year, these and other write-offs may bring you within the phase-out range to allow for some QBI deduction.
First-year expensing
The Section 179 deduction, commonly referred to as first-year expensing, can be used to write-off the cost of qualified property instead of depreciating it over a number of years. The deduction for 2025 was supposed to be $1.25 million, but the new law increased it to $2.5 million. This applies for any qualified property placed in service at any time in 2025.
The deduction phases out when total purchases for the year exceed a threshold amount. The threshold was supposed to be $3.13 million, but the new law changed it to $4 million. This means that some expensing is allowed until total purchases for the year exceed $6.5 million.
Impact: Bonus depreciation and first-year expensing may favorably affect your cash flow if you finance the purchase. The write-offs are based on the cost of the qualified property, without regard to any financing.
Expensing for production activity facilities
Usually, the cost of buildings must be depreciated over a set number of years: 27.5 for residential realty and 39 years for other commercial property. The new law introduces an immediate write-off—100% depreciation—for the cost of non-residential structures used for a qualified production activity (defined below) that is placed in service before January 1, 2031, the construction of which begins on or after January 19, 2025, and before January 1, 2029.
A qualified production activity includes manufacturing, refining, agricultural production, or chemical production. It also applies to warehouses and other structures integral to manufacturing. It does not include offices, lodging, R&D labs, and parking structures. The deduction cannot be claimed for shared or mixed-use areas. And the deduction applies only to production activity facility and not to the land on which it sits.
Impact: Construction entails obtaining the land, getting architectural plans, obtaining building permits, and securing financing. All of this takes time, so businesses that want to take advantage of this limited-time deduction need to get started soon.
Energy-efficient commercial buildings
There’s a special deduction allowed for the cost of building—new construction or retrofits—that meet certain energy standards. The deduction is based on square footage and energy savings achieved. It also depends on whether the project meets prevailing wage and apprenticeship requirements (PWA).
For 2025, the basic deduction is up to $1.16/sq. ft. and up to $5.81/sq. ft. if PWA is met. But the new law eliminates the deduction for projects beginning after June 30, 2026.
Impact: Businesses seeking to take advantage of this deduction need to commence construction of a project before July 1, 2026.
New energy-efficient home credit
Contractors who build homes that meet certain energy standards may claim a tax credit. For 2025, the credit is $2,500 for a single-family home or manufactured home, $500 per unit in a multifamily dwelling ($2,500 per unit if PWA is met). The credit applies in 2026 only if the home is first sold or leased before July 1, 2026. Homes acquired after June 30, 2026, will no longer qualify for the credit.
Impact: Contractors who want to take advantage of the credit need to act quickly to get things built and sold by the June 30, 2026, deadline.
Final thought
If you can take advantage of new tax breaks, it could lower your tax bill for the year…which means less required in estimated tax payments. The next payment (the third installment for 2025) is due September 15th for owners of pass-through entities and calendar-year C corporations. The final payment for 2025 is due December 15, 2025, for calendar-year C corporations and January 15, 2026, for owners of pass-through entities. Discuss your situation with your tax adviser to determine which of these (and other changes from the new tax law) favorably impact your taxes, so you can adjust the remaining estimated tax payments accordingly.
Find more information about tax deductions for our business in this list of blogs here.
