The OBBA §179 Deduction: Conversations Every Business Owner Should Be Having

It’s all the buzz… Congress passed another “new law” — the One Big Beautiful Bill Act (OBBBA). In it, major changes to the OBBA §179 deduction start in 2025. For small and mid-sized businesses, this could result in significant tax savings and better cash flow when investing in equipment, technology, or improvements.

Forget all the tax jargon… Let’s break it down in plain English.

Phase-Out Threshold Raised

The deduction doesn’t start to shrink until your purchases exceed $4 million, and it disappears completely after $6.5 million. So plan accordingly.

Inflation Adjustment

Starting in 2026, these limits will automatically adjust for inflation (translation: they’ll rise a little bit each year to keep up with rising costs).

Bonus Depreciation

The law also restores 100% bonus depreciation permanently (we’ll talk about “permanently” later), meaning any qualifying purchases beyond your §179 limit can still be written off right away.

Now, here’s the truth bomb: “permanently” in Washington doesn’t always mean forever. Tax laws are like fashion trends… what’s in today could be out tomorrow. So while this version of 100% bonus depreciation is written into law “for good,” future legislation could still change it. That’s why it’s smart to take advantage of it while it’s here.

Who Benefits from the New §179 Rules

These changes are designed to benefit small and mid-market business owners, not just big corporations.  

Why? Because most small and mid-sized businesses spend well under $6.5 million annually on equipment. With the rise in costs, who can afford more? The higher limits mean that now you can immediately write off much bigger purchases without getting phased out.

Examples in action:

• A family-owned manufacturing company spending $500,000 on new equipment can deduct the entire purchase immediately. CHA-CHING!!
• A growing landscaping business investing $1.2 million in trucks and equipment still stays comfortably under the new $2.5 million limit — and all tax deductible.

Larger businesses may also benefit, but once purchases exceed the $6.5M cap, §179 deduction goes bye-bye. This legislation was crafted for Main Street, not Wall Street.

What Qualifies as “Qualified Property”

Qualified property includes most tangible business assets you purchase and put into service, such as:

• Machinery and manufacturing equipment
• Computers, servers, and software
• Office furniture and fixtures
• Vehicles used for business purposes
• Improvements to nonresidential property (HVAC, roofing, security systems)

Rental property owners, take note: items like appliances, carpeting, and security systems can qualify too, as long as they’re used for business or income-producing activity.

Pro Tip: Maximize your §179 deduction by modeling purchases across all related entities. Careful planning can optimize cash flow, reduce taxes, and ensure every qualifying asset is captured — even for complex business structures.

Explore more tax insights at PLR CPAs ›

Real-Life Example: How the New §179 Deduction Impacts Cash Flow

Meet Sarah, owner of a successful construction company.

Net business income (2025): $1,000,000

Equipment purchases: $750,000

Under the new §179 rules, Sarah can expense all $750,000 immediately. That means, instead of waiting years to recover those costs through depreciation, she deducts the full amount against her $1 million income this year, reducing her taxable income to $250,000.

The result? A massive current-year tax savings.

What’s even more important, though, is Sarah now has extra cash she can use this year. Here are just a few possibilities:

• Grow her income: Invest in marketing campaigns bringing in new clients.
• Invest in employees: Incentivize with retention bonuses, hire skilled staff, expand her team, and offer a retirement plan.
• Catch up on retirement: Fund her own retirement plan, lowering future stress for herself and her heirs.

Why Cash Flow Matters More Than Ever

§179 is essentially a cash flow accelerator, helping you recover investment dollars immediately rather than slowly over time.

With interest rates still pressuring financing costs, having the ability to expense large purchases up front is a big deal. Instead of tying up capital in taxes, you keep more money in your business to:

• Pay down debt faster
• Cover payroll and operating expenses
• Fund growth opportunities without extra loans

Smart Ways to Reinvest Your Tax Savings

So what should you do with the tax savings? Consider reinvesting in areas that strengthen and grow your business. Here are some of my personal favorites:

• Upgrade technology to stay competitive
• Hire new employees or offer retention bonuses
• Invest in marketing to reach new customers
• Build reserves to weather economic uncertainty
• Pay down high-interest debt to reduce financial strain

Hidden Details You Don’t Want to Miss

Every tax pro is buzzing about the shiny new deduction limits. But here are the quiet issues you should also be thinking about:

• OBBA and Basis Games → After 10 years, basis step-ups in Opportunity Zone investments may wipe out depreciation recapture. That’s a hidden perk, but only if structured properly. States may not conform, which creates reporting headaches.
• Exit Strategy Mismatches → The exclusion under OBBA applies to sales of QOF interests, not asset sales. An entity-level exit could undercut benefits if not planned ahead.
• §179 vs. Bonus Depreciation → Everyone loves bonus depreciation, but §179 gives more control. It’s capped by business income, but when modeled carefully, it can optimize cash flow across related entities.
• Qualified Real Property → Don’t forget §179 now covers certain improvements like roofs, HVAC, and security systems. Too many businesses miss out because they assume it’s “equipment-only.”
• Self-employment Tax Implications → For sole proprietors and partnerships, §179 may reduce self-employment income differently than bonus depreciation. Smart planning here can shrink both income and SE tax.
• Intersection with OBBA → If you’re placing new property in a Qualified Opportunity Zone Business, whether you elect §179 or bonus depreciation today could impact future basis and, ultimately, your tax-free exit. Few are modeling both together, but they should be.

Plan Now, Profit Later: What Business Owners Should Do Next

The One Big Beautiful Bill Act makes §179 one of the most powerful tools available to business owners today. It’s a key tax-saving strategy in the cookie jar of every single innovative tax practitioner, assuming you are using one (wink).

With higher limits, “permanent” bonus depreciation, and expanded opportunities to write off purchases, now is the time to plan ahead for 2025 and beyond.

If you’re considering major equipment or property investments, ask the right questions: not just how much you can deduct today, but also how these changes affect basis, cash flow, exit planning, and multi-year strategy. That’s the conversation every business owner should be having with their tax pro right now.

Next Steps: Optimize Your Tax Strategy & Financial Plan

Connect with us to explore how the OBBA §179 deduction can strengthen your business’s cash flow and long-term financial plan.

Independent Contributor Statement

This article includes insights from a guest contributor who is not affiliated with Evensky & Katz / Foldes Wealth Management. The views expressed are their own and do not necessarily reflect those of the firm. This content is intended for informational purposes only and should not be considered legal, financial, or tax advice. Readers are encouraged to consult their own professional advisors regarding their individual circumstances.