The enactment of the One Big Beautiful Bill Act (OBBA) on July 4, 2025, has fundamentally redefined tax strategies for businesses in the United States. By understanding how to use bonus depreciation under this new legislation, business owners can capitalize on a permanent restoration of the 100% deduction, significantly enhancing cash flow and incentivizing domestic capital investment.
Understanding the OBBA Impact on Bonus Depreciation
The OBBA effectively repealed the phase-out schedule previously established by the Tax Cuts and Jobs Act (TCJA). Prior to this change, the bonus depreciation rate was scheduled to decrease by 20% each year; however, the OBBA has now made the 100% deduction rate permanent for qualifying assets placed in service after the effective date.
Updated Deduction Schedule
The most critical factor in how to use bonus depreciation now is the “placed in service” date. This determines whether your asset falls under the old declining rates or the new permanent 100% rate.
| Asset Placed in Service Date | Deduction Rate | Governing Law |
| Throughout 2024 | 60% | TCJA |
| Jan 1, 2025 – Jan 19, 2025 | 40% | TCJA |
| Jan 20, 2025 – Permanent | 100% | OBBA |
New Category: Qualified Production Property (QPP)
A major addition under the OBBA is the Qualified Production Property (QPP) designation. This allows businesses to apply the 100% deduction to a broader range of assets, including certain manufacturing facilities and industrial real estate that previously required decades-long depreciation schedules.
How to Use Bonus Depreciation Effectively Under New Rules
To maximize the benefits of the OBBA, businesses should implement a precise acquisition and reporting strategy.
- Verify the “Placed in Service” Date: To qualify for the 100% rate, the asset must be operational and ready for its intended use after January 20, 2025.
- Leverage QPP for Facilities: If your business is involved in manufacturing or production, evaluate if new facility construction or improvements qualify as QPP to take a 100% immediate deduction.
- Combine with Section 179: The OBBA increased the Section 179 limit to $2.5 million. Use Section 179 to manage net income levels, then apply 100% bonus depreciation to any remaining capital expenditures.
- Check State Conformity: Because some states “decouple” from federal tax law, you must verify if your state recognizes the OBBA’s 100% permanent rate or requires a different depreciation schedule.
Common Questions Regarding OBBA and Bonus Depreciation
Can I apply 100% bonus depreciation to used equipment?
Yes. Under the OBBA, used property remains eligible for bonus depreciation as long as it is new to the taxpayer and was not acquired from a related party or through certain non-taxable exchanges.
What if my business is currently in a loss?
Taking the 100% deduction is not mandatory. If your business has a net operating loss (NOL), you may choose to “elect out” of bonus depreciation for certain asset classes. This allows you to save those deductions for future years when your income—and tax rate—might be higher.
Does OBBA apply to assets contracted before the law passed?
Generally, assets must be placed in service after January 20, 2025. However, if a binding written contract was in place before the law’s effective date, transition rules may apply. You should review the specific “Binding Contract” clauses within the OBBA guidance.
Independent Fact-Checking and Verification
Because the OBBA is recent legislation, taxpayers must stay informed about new administrative rulings and IRS bulletins. To independently verify how to use bonus depreciation for your specific industry, follow these steps:
- Visit official government tax portals or public institution websites.
- Search for “OBBA Section 168(k) Permanent Extension” or “Instructions for Form 4562.”
- Consult “Publication 946” for the most updated list of asset recovery periods to confirm which properties qualify as 20-year-or-less assets.
- Monitor official announcements regarding “State Conformity to OBBA Depreciation” to ensure your state filings are accurate.
Strategic Conclusion for Business Owners
The permanent 100% deduction provided by the OBBA offers a historic opportunity for business expansion. By mastering how to use bonus depreciation, you can effectively subsidize the cost of new technology, machinery, and production facilities through immediate tax savings.
To proceed, audit your 2025 and 2026 capital expenditure plans to ensure all qualifying assets are documented as being placed in service after the January 20, 2025, threshold. Coordinate with your accounting department to ensure that both Section 179 and OBBA 100% bonus depreciation are applied in the most tax-efficient sequence. Finally, ensure that all state-level adjustments are accounted for to avoid compliance issues.
This article is for informational purposes only. Consult a CPA for personalized advice.