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?
📖 Read more about the OBBB: molentax.com/obbb-webinar-series/#blogs
🎓 Attend a free webinar: molentax.com/obbb-webinar-series/#register
📅 Schedule a 1-on-1 consultation: molentax.com/contact
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?
📖 Read more about the OBBB: molentax.com/obbb-webinar-series/#blogs
🎓 Attend a free webinar: molentax.com/obbb-webinar-series/#register
📅 Schedule a 1-on-1 consultation: molentax.com/contact
