This reverses the phasedown schedule enacted under the Tax Cuts and Jobs Act (TCJA), which would have reduced bonus depreciation to 40% for property placed in service in 2025 and eliminated it entirely by 2027. The restoration of 100% bonus depreciation through 2029 represents a once-in-a-decade opportunity for strategic capital deployment. Companies that act decisively to accelerate equipment investments, optimize financing strategies, and carefully navigate state tax complications will achieve substantial competitive advantages. The 2025 tax reform repeals the Section 179D Energy Efficient Commercial Building Deduction for projects that begin construction after June 30, 2026. This deduction, which has historically incentivized energy-efficient design and retrofits in commercial buildings, will no longer be available for projects that miss the construction start deadline.
These changes apply to property placed in service in taxable years beginning after December 31, 2017. These provisions allow investors to have a higher cap on the amount of gain they could exclude. They also increase the gross asset limit, so growing companies or companies that become too large may be able to issue QSBS once again. The bill reverses the 2022 rule that required businesses to amortize Section 174 R&E expenses over five years. Beginning in 2025, companies can once again fully deduct these expenditures in the year they are incurred.
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If you actively participate in a rental property, you may be able to count the net rental income. If you file joint returns with your spouse, count both your business income and your spouse’s business income (if any). This additional break is available for qualified property with construction periods beginning between January 19, 2025, and December 31, 2028. The property must be placed in service in the United States or a U.S. possession before 2031. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.
IRS Aims to Simplify CAMT Guidance Relating to Partnership Interests
This shows why companies love bonus depreciation – it’s like an interest-free loan from the government by deferring taxes. Under the One Big, Beautiful Bill Act (“Big Beautiful Bill”), businesses can now permanently deduct 100% of qualifying asset costs up front (versus 80% under prior law), unlocking immediate tax savings and investment incentives. Beyond the headlines, this bill brings extensive pro-business provisions, new strategic tax planning opportunities, and significant policy changes that will directly impact business owners, high-income earners, and investors alike. These increased limits offer substantial benefits, particularly for small and medium-sized businesses.
Capital Structure Optimization
Before the new law, non-residential buildings generally had to be depreciated over 39 years. 100% bonus depreciation is now available for qualified property placed in service after January 19, 2025. This allows companies to immediately deduct the full cost of eligible capital investments — including servers, networking equipment, lab instruments and software development tools. Even at a 40% bonus depreciation rate, cost segregation studies remain important for real estate owners, operators, and investors looking to improve after-tax cash flow. C-corps don’t face the same $500k loss cap that individual owners do, so full bonus-generated losses can be utilized over time.
We’ll say it again: 100% Bonus Depreciation is now permanent!
The conformity question may be particularly challenging to analyze, because states have taken a variety of inconsistent and complex approaches to the treatment of these items, especially Section 168(k). For example, many states, including Illinois and New York, have decoupled from Section 168(k), instead generally using slower depreciation methods. A few states, including Florida and North Carolina, have decoupled from full bonus depreciation but allow a state-specific bonus depreciation method under which the deduction is typically more accelerated than under regular, non-bonus depreciation. About one-third of the states historically have maintained consistent conformity to federal bonus depreciation. Section 179 remains particularly useful for property types not eligible for bonus depreciation, such as certain improvements to nonresidential real property (e.g., roofs, HVAC systems and security systems). A qualified production activity includes the manufacturing of tangible personal property, agricultural production, chemical production, or refining.
This provision is effective for property placed in service in tax years beginning after December 31, 2024. Documentation remains as important as ever, and many businesses are focusing renewed efforts on meticulous recordkeeping in the near term. A cost seg study identifies $200,000 of depreciable components (e.g., appliances, landscaping, carpets).→ You write off all $200,000 in 2025. The IRS announced plans to partially withdraw and revise CAMT regulations for partnerships, offering interim guidance to simplify compliance and reduce costs. Under the TCJA, QIP replaced Qualified Leasehold Improvement, Qualified Restaurant Improvement, and Qualified Retail Improvement Property. Take a deeper dive into the provisions of the 2025 final budget reconciliation bill with our detailed analysis.
- The OBBBA permanently reinstates 100% bonus depreciation for qualified business property placed in service after January 19, 2025.
- Starting in 2025 through 2028, individuals in occupations that customarily receive tips can claim a new deduction for qualified tips, even if they don’t itemize their deductions.
- To learn more about these provisions and how they apply to your circumstances and planning opportunities, contact us.
- \r\n \r\n The information contained herein is general in nature and is based on authorities that are subject to change.
In some cases, electing out of bonus depreciation to preserve the deduction for future years may result in a better answer than creating a NOL, the use of which is limited. The 2025 reconciliation bill provides significant opportunities for technology companies to take advantage of new and revised tax benefits. Companies should act quickly to maximize the 100% bonus depreciation and R&E expenditure deductions. Even at reduced federal bonus depreciation rates, cost segregation remains a valuable tool in the real estate tax planning arsenal. The TCJA allows small business taxpayers with average annual gross receipts of $25 million or less in the prior three-year period to use the cash method of accounting.
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The magnitude of immediate cash flow benefits—often representing 15-25% of total investment costs—fundamentally alters capital allocation economics. Combined with enhanced Section 179 limits, these provisions enable more aggressive growth strategies, improved financial flexibility, and accelerated modernization initiatives. The 2025 tax reform reshapes the financial and strategic landscape for the real estate industry. From permanent bonus depreciation and expanded Section 179 expensing to enhanced incentives for affordable housing and community investment, the opportunities are substantial but so are the complexities.
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- Additionally, the time threshold for small business contracts has been extended from two years to three years, giving more flexibility to contractors with longer project timelines.
- The Act also establishes a government-funded pilot program providing a $1,000 credit into a Trump account for each qualifying child born between 2025 and 2028 who is a U.S. citizen at birth.
- By easing this restriction, the reform opens the door to more dynamic investment strategies and operational models, particularly for vertically integrated real estate enterprises.
- QPP means nonresidential real estate, such as a building, that’s used as an integral part of a qualified production activity, such as the manufacturing, production or refining of tangible personal property.
- Take Another LookThese are just a few of the key business provisions introduced in the OBBBA.
- You invest $100,000 in capital gains into a rural OZ fund.→ After 5 years, your taxable gain drops to $70,000.→ After 10 years, any appreciation is entirely tax-free.
QSBS/Section 1202: A New Landscape for Startup Investment
Bonus depreciation is an extra first-year depreciation allowance that lets businesses write off a large percentage of an asset’s cost immediately, rather depreciation strategies under the new tax law than spreading it over years. A 100% bonus depreciation means full expensing – you deduct 100% of the asset’s cost in the year purchased. In contrast, an 80% bonus depreciation (the phased-down rate that applied in 2023) means you deduct 80% of the cost in Year 1, then depreciate the remaining 20% over the asset’s normal life.
How Companies Can Benefit From Foreign Tax Incentives
Augmenting the cost basis, in turn, reduces the size of the taxable capital gain when selling the property. The 2025 tax reform makes significant changes to Section 1202 of the IRC, which governs the tax treatment of qualified small business stock (QSBS). Historically, Section 1202 allowed investors to exclude up to 100% of capital gains (depending on acquisition date) on the sale of QSBS held for more than five years — an incentive that has been instrumental in driving early-stage investment in tech startups. The One Big Beautiful Bill Act presents a mixed landscape for businesses with fixed assets. Working with a knowledgeable professional to navigate the new law can help businesses maximize their tax savings. The TCJA restricted business interest deductions generally to 30% of ATI starting in 2018 if you were a taxpayer that wasn’t considered a small business under Section 163(j).