Depreciation Provisions in Recent Tax Legislation

Among the most impactful provisions in the new tax legislation are the restoration of 100% bonus depreciation, enhancements to Section 179 expensing, and the introduction of a new property category: Qualified Production Property.

Here's what these changes mean for you.

One Hundred Percent Bonus Depreciation (Full Expensing)

The new tax legislation restores 100% bonus depreciation, allowing businesses to immediately deduct the full cost of qualifying property in the year it is placed in service. This reverses the phase-down schedule that began after 2022 under the Tax Cuts and Jobs Act.

Effective dates: Property acquired and placed in service after January 19, 2025.

Eligible property includes:

• Tangible personal property with a recovery period of 20 years or less
• Computer systems, machinery, and equipment
• Certain improvements to nonresidential property

New or used property meeting certain acquisition requirements.

This provision encourages capital investment, especially for businesses planning new construction, property acquisitions, large equipment purchases, or facility upgrades.

Section 179 Expensing – Expanded Limits

The new tax bill increases the Section 179 deduction limit to $2.5 million, with a phase-out threshold starting at $4 million. These amounts will be indexed for inflation starting in 2026.

Key items include:

• Selective expensing, meaning you can choose which assets to expense
• It applies to both new and used properties
• It includes certain improvements to nonresidential real estate, such as HVAC, roofs, and security systems

Qualified Production Property

A new property category was introduced in the new tax legislation, known as Qualified Production Property under Section 168(n). The legislation provides full expensing for Qualified Production Property, nonresidential property used in qualified production activities.

To qualify, property must be:

• U.S.-based
• Original use (new construction or new conversion to production activities)
• Placed in service between January 20, 2025, and January 1, 2031

Eligible activities include:

• Manufacturing
• Agricultural processing
• Chemical production
• Substantial transformation of tangible personal property

This provision incentivizes domestic manufacturing and factory construction. It's especially beneficial for companies building or converting existing properties to production facilities.

What's Next for New Tax Legislation

The new depreciation provisions are a significant opportunity for businesses looking to invest, expand, or modernize. Whether you're a manufacturer building a new plant or a small business upgrading equipment, these changes offer immediate tax relief and strategic planning opportunities.

Our experienced tax team will help you understand what the new tax legislation, including bonus depreciation opportunities, means for you.