Section 179 and Bonus Depreciation Changes: What the OBBB Means for 2025 and Beyond

At Molen & Associates, we’ve been guiding clients through tax law changes since 1980, and we can say with confidence: the One Big Beautiful Bill (OBBB) has reshaped the landscape for business deductions.

One of the most impactful updates? The enhanced Section 179 expensing rules and the return of 100% bonus depreciation—both powerful tools for reducing taxable income when you purchase qualifying business assets.

Section 179 Expensing: Bigger Limits, Better Planning

Under the OBBB, the maximum Section 179 deduction—the amount you can immediately expense rather than depreciate over time—has been increased to $2.5 million for assets placed in service in 2025 or later.

The phase-out threshold (the point where your 179 deduction starts to shrink) has also jumped to $4 million.

For context:

2023 limit: $1.16 million, phasing out at $2.89 million
2025 limit: $2.5 million, phasing out at $4 million

This means more small and mid-sized businesses can fully deduct the cost of equipment, vehicles, furniture, software, and other qualifying property in the year of purchase—without hitting the phase-out as quickly.

Bonus Depreciation: 100% is Back

From 2018 through 2022, bonus depreciation allowed you to write off 100% of the cost of qualifying assets in the year you placed them in service. That percentage began phasing down, hitting just 40% for assets placed in service in early 2025.

The OBBB resets bonus depreciation to 100% for property placed in service on or after January 19, 2025, with no scheduled phase-down (although, as always, “permanent” in tax law is subject to future change).

The QBI Interaction: Why This Matters

If you own a pass-through business (S corp, partnership, or sole proprietorship), you may be eligible for the 20% Qualified Business Income (QBI) deduction.

Here’s the catch:

Before the OBBB, bonus depreciation could lower your QBI deduction because it reduced taxable business income.
QBI was also scheduled to sunset after 2025.
The OBBB makes QBI permanent and restores it to 100% (it had been phased down to 40% in recent years).

Result: You can now take full bonus depreciation and keep your full 20% QBI deduction, making asset purchases even more powerful as a tax-saving strategy.

Section 179 vs. Bonus Depreciation: Which Should You Use?

Feature	Section 179 Expensing	Bonus Depreciation
Deduction Limit	$2,500,000 (post-OBBB)	No dollar limit.
Phase-Out Threshold	Begins at $4,000,000 (post-OBBB)	No phase-out threshold.
Qualified Property	Tangible personal property, off-the-shelf software, and some improvements.	Tangible personal property with a recovery period of 20 years or less, certain software, and qualified improvement property.
Timing	Election must be made in the year the property is placed in service.	Automatic unless the taxpayer elects out.
Permanent 100% Deduction	No, subject to dollar and phase-out limits.	Yes, for property placed in service after December 31, 2024.
Inflation Adjustments	Yes, for dollar and phase-out limits.	No inflation adjustments.

4. Effective Dates

Section 179 Updates:
Effective for taxable years beginning after December 31, 2024.
Bonus Depreciation Updates:
Permanent 100% bonus depreciation applies to property placed in service after December 31, 2024.

What This Means for You

Realtors

If you’re a real estate agent running your own business, Section 179 and bonus depreciation can apply to:

Office furniture and equipment
Computers, tablets, and cameras for marketing
Business-use vehicles (subject to luxury auto caps)
Office improvements if you own your building

With QBI fully restored, you can deduct these purchases without sacrificing your 20% QBI benefit—especially valuable if you’re reinvesting in your business during a high-income year.

Real Estate Investors

While Section 179 generally doesn’t apply to rental property assets (unless you’re a real estate professional for tax purposes), bonus depreciation combined with cost segregation studies can still produce massive deductions.

Improvements like appliances, flooring, and certain fixtures often qualify for shorter depreciation lives, making them eligible for 100% bonus depreciation.
If you meet Real Estate Professional Status (REPS), these deductions can offset other active income—sometimes creating a six-figure tax swing.

Self-Employed Professionals

From contractors to consultants, these rules open the door to strategic equipment purchases:

Upgrade tools, technology, or vehicles before year-end to maximize deductions.
Use Section 179 for more control—picking which assets to deduct now and which to depreciate later.
Use bonus depreciation when you want to eliminate as much taxable income as possible in a single year.

Planning Tips

Model the numbers: Sometimes spreading deductions over several years is better than taking it all at once.
Watch for state rules: Some states limit or don’t conform to federal bonus depreciation.
Combine with QBI planning: Now that QBI is permanent and restored to 100%, coordinate depreciation deductions with entity structure for the biggest benefit.
Think resale: Remember that depreciation recapture can increase taxable income if you sell the asset later—plan accordingly.

Bottom Line:
The OBBB’s updates to Section 179, bonus depreciation, and QBI create one of the most taxpayer-friendly environments for business asset purchases in recent memory. Whether you’re a realtor, a real estate investor, or self-employed, the right strategy can mean the difference between a large tax bill and keeping more money in your pocket.

Want to see how these changes can work for you?

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