OBBBA 2025: Big Changes to Bonus Depreciation and Section 179
Businesses planning to invest in new equipment, vehicles, or improvements in 2025 have reason to celebrate. The recently passed One Big Beautiful Bill Act (OBBBA) dramatically expands depreciation deductions, including the return of 100% first-year bonus depreciation and an increase in Section 179 expensing limits. These changes mean business owners — from medical professionals to creatives running home studios — may be able to write off much larger portions of their investments right away, significantly lowering taxable income.
Below is a breakdown of what the law includes, which assets qualify, and how business owners in Los Angeles and beyond can plan strategically to maximize these benefits.
What Is Depreciation and Why Does It Matter?
Depreciation is a tax deduction that allows businesses to recover the cost of certain property over time. Traditionally, you write off the expense of equipment, machinery, or property improvements over several years. However, Congress sometimes provides accelerated depreciation options to encourage business investment.
With the OBBBA, accelerated write-offs are back in a big way. Instead of waiting years to recover costs, many businesses can deduct 100% of eligible purchases in the first year — a major cash flow advantage.
100% First-Year Bonus Depreciation Is Back
Prior to the new law, bonus depreciation was being phased out:
- 80% in 2023
- 60% in 2024
- 40% for assets placed in service January 1–19, 2025
Now, under the OBBBA, businesses may claim 100% first-year bonus depreciation for eligible assets acquired and placed in service after January 19, 2025. This provision is permanent.
Eligible Assets Include:
- Equipment and machinery
- Computer hardware and peripherals
- Commercial software
- Certain vehicles (subject to limits)
- Qualified Improvement Property (QIP) — improvements to the interior of nonresidential buildings, excluding enlargements, elevators/escalators, or structural framework.
Example: A Los Angeles dental practice buys $300,000 worth of new dental chairs and imaging equipment in March 2025. Under old rules, only 40% of the cost ($120,000) could be deducted in the first year. Under the new law, the dentist can deduct the entire $300,000 immediately.
Watch Out: Excess Business Loss Rule
While there is no limit on the cost of eligible assets for corporations, individual taxpayers may run into the excess business loss (EBL) limitation.
- For 2025, losses above $313,000 (single) or $626,000 (married filing jointly) cannot be deducted in the current year.
- Instead, these excess losses are carried forward as a Net Operating Loss (NOL).
Example: A freelance filmmaker in Los Angeles spends $700,000 on production equipment. The 100% deduction might generate a paper loss larger than their allowable EBL limit. Part of the deduction would carry forward instead of reducing 2025 taxes immediately.
Section 179 Expensing Gets More Generous
In addition to bonus depreciation, the OBBBA doubles Section 179 expensing limits:
- $2.5 million deduction limit (up from $1.25 million)
- Phaseout begins at $4 million (up from $3.13 million)
- Indexed for inflation starting in 2026
Section 179 Eligible Assets:
- Equipment, computers, software
- Vehicles (subject to limitations)
- QIP (interior building improvements)
- Roofs, HVAC, fire protection, and security systems in nonresidential buildings
- Property used in lodging businesses
Important Limitations:
- Business Income Limitation – You cannot use Section 179 to create a taxable loss. Unused deductions carry forward.
- SUV Limitation – For heavy SUVs (over 6,000 lbs. but under 14,000 lbs.), the maximum Section 179 deduction is capped at $31,300 for 2025.
Section 179 vs. Bonus Depreciation: Which Is Better?
While both provisions allow accelerated deductions, there are key differences:
- Bonus Depreciation
- No annual dollar limit
- Can create or increase a Net Operating Loss
- Applies automatically unless you opt out
- Section 179
- Subject to dollar caps and phaseouts
- Limited by business income
- Offers more flexibility in choosing which assets to expense
Planning Tip:
In most cases, businesses should use 100% bonus depreciation first, then Section 179 for any additional assets or for property types where bonus depreciation does not apply.
New Deduction for Qualified Production Property (QPP)
The OBBBA adds a brand-new break: 100% first-year depreciation for Qualified Production Property (QPP).
- QPP includes nonresidential real estate used in manufacturing, production, or refining of tangible goods.
- This means entire factories or production facilities could be written off in the first year.
- Construction must begin between Jan. 19, 2025 and Dec. 31, 2028 and be placed in service before 2031.
Example: A Los Angeles-based beverage company builds a new $15 million bottling facility in 2026. Under prior law, the building would be depreciated over 39 years. Now, the entire $15 million can potentially be written off in year one.
Who Benefits Most?
- Doctors & Dentists – Large equipment and technology purchases can be fully deducted.
- Freelancers & Creatives – Cameras, editing equipment, studio gear, and software qualify.
- Shopify/Amazon Sellers – Warehouse improvements, packaging machines, and logistics equipment may qualify.
- High-Net-Worth Individuals – Strategic timing of purchases may help reduce taxable income while planning for long-term growth.
Strategic Tax Planning Considerations
- Timing Is Key – Purchases must be placed in service after Jan. 19, 2025 to qualify for the new rules.
- Don’t Ignore EBL Limits – High-value purchases by individuals may not all be deductible in the first year.
- Work With a CPA – Choosing between Section 179 and bonus depreciation requires careful tax modeling.
- Consider Future Income – If deductions create losses you can’t use this year, they can still benefit you later.
Final Thoughts
The OBBBA creates one of the most favorable depreciation environments in recent history. From full 100% bonus depreciation to expanded Section 179 expensing and a brand-new QPP deduction, businesses that plan wisely can save millions in taxes.
At Velin & Associates, Inc., we help Los Angeles business owners — from freelancers to medical professionals to high-net-worth individuals — make smart tax planning decisions that maximize deductions while staying compliant with the IRS.
Contact us today to discuss how these new depreciation rules can reduce your 2025 tax bill.
Velin & Associates, Inc
8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org
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