Section 179 is Enhanced, and 100% Bonus Depreciation Is Back—And Here to Stay: What the New Tax Law Means for Your Business

1. Permanent 100% Bonus Depreciation (IRC §168(k))
   Starting January 20, 2025, businesses can fully expense the cost of qualified property placed in service, with no phase-down schedule. This change simplifies long-term planning and enhances cash flow by allowing the immediate deduction of capital asset costs.

• What’s eligible? Same property types as before—including new and used business assets with a recovery period of 20 years or less.
• Transitional option: Taxpayers may elect to use pre-Act phase-down rates for a limited time.
• Who benefits? Small to large businesses investing in machinery, vehicles, equipment, and qualifying leasehold improvements.

2. New 100% Deduction for Qualified Production Property (QPP) – IRC §168(n)
   Manufacturers planning to build or improve domestic factory facilities get a special boost with the introduction of Section 168(n):

• Eligible construction must begin between January 20, 2025, and December 31, 2029, and the property must be placed in service before January 1, 2031.
• Designed to promote U.S.-based manufacturing, this provision can significantly lower the upfront tax burden on long-term projects.

3. Increased Section 179 Expensing Limits
   For property placed in service in tax years beginning January 1, 2025, Section 179 limits increase to:

• $2.5 million maximum deduction
• $4 million phase-out thresholdThese limits will be adjusted annually for inflation moving forward.

• A manufacturer purchases $500,000 of new equipment in Q2 2025. Under the new law, they can deduct the entire cost immediately—either using 100% bonus depreciation or Section 179, depending on their tax planning strategy.
• A business owner buys $3 million in qualifying machinery. They can expense $2.5 million using Section 179 and apply bonus depreciation to the remaining $500,000.
• A company breaking ground on a new factory in 2026 qualifies for full expensing under the new QPP rules when the facility is placed in service before 2031.

• Time purchases carefully: To qualify for 100% bonus depreciation, ensure assets are acquired and placed in service after January 19, 2025.
• Plan construction projects now: Projects that fall within the QPP window may benefit significantly from full expensing.
• Leverage cost segregation studies: These help identify short-life components within a building to maximize deductions.
• Compare Section 179 vs. bonus: Section 179 can be used selectively to manage taxable income; bonus depreciation is automatic unless opted out.
• Monitor state conformity: Not all states follow federal depreciation rules—particularly bonus depreciation.

• File Form 4562 with timely filed returns to claim depreciation or Section 179 deductions.
• Maintain detailed records showing acquisition dates, placed-in-service dates, and construction timelines (for QPP eligibility).

Whether you’re acquiring new equipment, expanding your factory, or planning ahead for 2025 and beyond, our team is ready to assist and guide your business through these opportunities with confidence.

Together, we can help you build a tax strategy that moves your business forward. As your trusted advisors at Froehling Anderson, our Minneapolis and St. Cloud based CPAs are here to help you understand and apply these changes to maximize your tax savings.

Contact us today!

• Checkpoint Executive Summary: The Act of 2025 (Thomson Reuters)
• Tax Foundation, “FAQ: The One Big Beautiful Bill Act Tax Changes” KLR+15Tax Foundation+15InsightPlus+15
• Key Depreciation Changes from the ‘One Big Beautiful Bill Act’ Key Depreciation Changes from the ‘One Big Beautiful Bill Act’ – Whiteman Osterman & Hanna LLP – Albany, NY
• KBKG / Jones Day summaries of tax changes including depreciation provisions KBKG+1Jones Day+1
• Thomson Reuters/tax professional commentary on bonus and Section 179 limits Impact of the ‘One Big Beautiful Bill Act’: How to respond
• Foster Swift summary of tax code changes under OBBBA Kiplinger+11Foster Swift+11Tax Foundation+11
• Baker McKenzie analysis of U.S. investment provisions Bipartisan Policy Center+4InsightPlus+4Axios+4
• Kahnlitwin summary, 100% bonus depreciation restored Warren Averett CPAs & Advisors+15KBKG+15KLR+15
• Plante Moran explanation of bonus depreciation and § 168(n) S. Bank+6Plante Moran+6InsightPlus+6
• Section 179 current limits: NerdWallet / AgDirect summaries AgDirect
• IRS newsroom guidance on OBBBA deductions and transition relief Kiplinger+8Center for American Progress+8Tax Foundation

The information provided here is accurate at the time of publication but may change as laws and regulations evolve. While Froehling Anderson aims to share accurate, timely information, we encourage you to reach out to your relationship manager for guidance on your specific situation.