Thinking about upgrading your equipment in 2025? The OBBBA bill could let you write off more—faster—and keep more cash in your business.
SEC. 70306. INCREASED DOLLAR LIMITATIONS FOR EXPENSING OF CERTAIN DEPRECIABLE BUSINESS ASSETS.
This section of a proposed tax bill is about making it easier and more attractive for businesses to buy new equipment and other assets by letting them write off the full cost sooner.
What is Section 179 Expensing?
Normally, when a business buys a new machine or piece of equipment, it can't deduct the full cost all at once in the year of purchase.
Instead, it has to "depreciate" the asset—deducting a small portion of the cost each year over its useful life.
Section 179 is a special tax rule that allows businesses to immediately deduct the full purchase price of qualifying equipment and/or software placed in service during the tax year, instead of spreading the deduction over several years.
This is a big benefit because it lowers taxable income right away, reducing the tax bill sooner.
IN GENERAL.—Section 179(b) is amended.
The maximum amount a business can deduct immediately in a single year under Section 179 is increasing significantly.
◈ Old Limit: $1,000,000
◈ New Limit: $2,500,000
Example:
A small manufacturing company buys a new machine for $1.5 million. Under the old rules, they could only immediately deduct $1 million of that cost, and the remaining $500,000 would have to be depreciated over several years.
Under the proposed new rules, they could immediately deduct the *entire* $1.5 million in the year they bought it, saving them a lot more on taxes right away.
Phase-Out Threshold
There's also a "phase-out" rule for Section 179. If a business buys *too much* in qualifying property in a year, the maximum deduction starts to decrease. This part of the bill is increasing the point at which that phase-out begins.
◈ Old Phase-Out Threshold: If a business bought more than $2,500,000 worth of qualifying property in a year, their $1 million deduction limit would start to go down dollar-for-dollar.
◈ New Phase-Out Threshold: The deduction limit will now start to go down only if a business buys more than $4,000,000 (four million dollars) worth of qualifying property in a year.
Example:
If a business buys $3 million worth of equipment. Under the old rules, their maximum $1 million deduction would have already been reduced by $500,000 (since $3M is $500K over the $2.5M threshold).
Under the new rules, because $3 million is *below* the new $4 million threshold, their full $2.5 million Section 179 deduction would still be available (assuming they didn't buy more than $2.5M in assets eligible for deduction).
This means more businesses, especially growing ones making larger capital investments, will be able to take advantage of the full deduction.
How these new dollar amounts will be adjusted for inflation in future years.
The new $2.5 million and $4 million limits will be adjusted for inflation starting from 2025, using 2024 as the base year for the calculation.
This means the benefit of these increased limits won't be eroded as quickly by inflation over time.
EFFECTIVE DATE.—The amendments made by this section shall apply to property placed in service in taxable years beginning after December 31, 2024.
These changes will apply to new equipment and assets that businesses start using (or "place in service") in tax years that begin *after* December 31, 2024.
In a Nutshell for Business Owners:
This proposed change significantly boosts the immediate tax write-off available for businesses buying new equipment. It means you can deduct a much larger amount of your equipment purchases in the year you buy them, leading to:
* Lower taxable income sooner.
* Reduced tax bills immediately.
* More cash flow available for your business.
It also makes it less likely that your deduction will be phased out if you make substantial capital investments. This is designed to encourage businesses to invest in new assets and stimulate economic activity.
