OBBA and Bonus Depreciation: What Section 168(k) Means for Your Business

The One Big Beautiful Act (OBBA) has made some major changes to the way businesses can deduct the cost of their equipment and property purchases. One of the most significant updates is in Section 168(k) — better known as Bonus Depreciation.

Word Bonus in squares

Let’s break it down in plain English.

What Is Bonus Depreciation?

Bonus depreciation allows businesses to immediately deduct a large portion (or all) of the cost of qualifying property in the year it’s placed in service, instead of spreading the deduction out over several years.

Think of it as a way for the tax code to reward companies that invest in growth — new machinery, equipment, vehicles, and certain types of improvements.

What Did OBBA Change?

Under OBBA, Bonus Depreciation is restored to 100% for qualified property placed in service between January 19, 2025, and December 31, 2029.

That means:

• Businesses can write off the entire purchase price of eligible property right away.

• It applies to both new and used property (as long as it’s the taxpayer’s first use).

• After 2029, the deduction phases down unless further legislation extends it.

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Why Does This Matter?

For businesses, cash flow is everything. Restoring 100% Bonus Depreciation means you:

• Save on taxes upfront instead of waiting years for smaller depreciation deductions.

• Free up cash to reinvest in your company immediately.

• Lower your taxable income in the year of big purchases, which can be a powerful tax planning tool.

Example: If your business buys $500,000 worth of qualifying equipment in 2026, you can deduct the entire $500,000 that year — instead of depreciating it over 5, 7, or more years.

Strategic Considerations

• Timing matters: To take advantage of the 100% deduction, the property must be placed in service within the 2025–2029 window.

• Coordinate with Section 179: Bonus depreciation is different from Section 179 expensing, and the two can sometimes be used together.

• Phaseout risks: Be mindful that after 2029, the benefit may reduce, unless Congress steps in again

  
  

Final Thoughts

The OBBA’s restoration of 100% Bonus Depreciation under Section 168(k) is a big win for businesses of all sizes. Whether you run a small shop or a large manufacturing company, this provision makes it easier to invest in growth without waiting years to see the tax benefits.

If you’re planning major purchases in the next few years, now is the time to review your tax strategy with a professional and maximize the benefits while they last.