The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, made several tax changes for small businesses. One of the most significant is immediate expensing — the ability to deduct the full cost of a purchase or investment in the same year it’s made, rather than spreading the deduction over many years. Immediate expensing is a favorite tool of policymakers because it encourages investment in equipment and other productivity-enhancing assets.
For business owners, it means getting the tax savings when you need them most — right after making a large purchase — freeing up cash to reduce borrowing, reinvest in operations, or build reserves.
OBBBA Expensing Provisions
Below are three important expensing provisions in the OBBA.
- Permanent 100% Bonus Depreciation: Businesses can now permanently deduct 100% of the cost of qualifying property in the year it is placed in service.
- Special Expensing for Qualified Production Property in Buildings: Certain production property installed inside buildings can be fully expensed if construction begins between January 20, 2025, and December 31, 2028, and the property is placed in service by the end of 2030.
- Full Expensing of U.S.-Based R&D Costs: Beginning in 2025, domestic research and development expenses, including software development, can be fully deducted in the year incurred, with a provision to apply retroactively to certain prior years.
What Qualifies for Immediate Expensing?
Most tangible property with a “recovery period” of 20 years or less qualifies. This includes machinery, manufacturing equipment, tools, office furniture, fixtures, computers, and certain improvements to non-residential buildings such as roofing, HVAC, fire protection, and security systems. New and used property can qualify as long as it’s new to the business.
Real property — land and buildings — does not qualify. However, the Special Expensing for Qualified Production Property in Buildings provision allows immediate expensing for assets such as manufacturing lines, brewing tanks, or food processing equipment, provided the project meets the construction and placed-in-service deadlines.
Bonus Depreciation vs. Section 179 for Pass-Through Entities
Didn’t we already have expensing with Section 179?
Yes, but there are important differences. Section 179 deductions are taken at the owner or partner level and are limited by the owner’s taxable income across all businesses they own. If an owner has multiple entities, Section 179 limits apply to the total combined deduction.
Bonus depreciation is claimed at the entity level. This means the full deduction passes through to owners regardless of their other businesses or income. Bonus depreciation also has no annual limit, no phase-out threshold, can create or increase a loss, and applies to both new and used property.
Bottom Line
Immediate expensing under the OBBBA isn’t just about faster deductions — it’s about improving cash flow. Being able to claim the full deduction in the year of purchase means you keep more cash in your business when it’s needed most, right after making a large investment. That cash can be used to reduce borrowing, reinvest in operations, or strengthen reserves, turning a tax rule into a real financial advantage that can ultimately increase the value of your firm.
This article is for informational purposes only and does not constitute personalized tax advice. Every taxpayer’s situation is unique, and you should consult a qualified tax professional before making any financial decisions.
