For small and mid-sized businesses, the Section 179 deduction is one of the most powerful tax incentives available. It allows companies to immediately expense the full cost of qualifying business equipment and certain improvements rather than depreciating them over many years.

Under the One Big Beautiful Bill Act (OBBBA) enacted in 2025, Section 179 receives updated limits, expanded eligibility, and new long-term stability. These improvements help businesses invest in equipment, vehicles, and technology with confidence.

Z Tax & Accounting explains the updated rules, the benefits, and what businesses must know to take full advantage of Section 179 under OBBBA.

What Is Section 179?

Section 179 of the Internal Revenue Code allows businesses to immediately deduct the full purchase price of qualifying property placed in service during the year, instead of capitalizing and depreciating the expense over time.

This deduction is particularly important for:

• Manufacturers
  
  

• Construction companies
  
  

• Transportation businesses
  
  

• Medical and dental practices
  
  

• Tech firms
  
  

• Retailers and wholesalers
  
  

• Service-based businesses
  
  

• Farms and fisheries
  
  

Section 179 aims to stimulate business investment by reducing after-tax costs.

How OBBBA Updates Section 179 for 2025 and Beyond

The One Big Beautiful Bill Act enhances Section 179 in several key ways:

1. Higher Deduction Limits

Beginning in tax year 2025, OBBBA increases the maximum Section 179 deduction and sets the base for stronger inflation indexing in future years.

Key enhancements include:

• Higher annual deduction cap
  
  

• Higher phase-out threshold
  
  

• More room for larger equipment purchases
  
  

These increases benefit growing businesses that invest heavily in equipment, machinery, and technology upgrades.

2. Improved Inflation Adjustments

Under prior law, Section 179 limits were adjusted annually for inflation.
OBBBA strengthens this by applying broader and more consistent indexing to keep pace with rising equipment costs.

This means:

• Less erosion of buying power over time
  
  

• More predictable planning for multi-year investments
  
  

• Better alignment with real equipment market prices
  
  

3. Continued Inclusion of a Wide Range of Qualifying Property

Section 179 under OBBBA continues to allow expensing of:

Eligible Tangible Property:

• Machinery
  
  

• Equipment
  
  

• Vehicles
  
  

• Tools
  
  

• Computers
  
  

• Office furniture and fixtures
  
  

• Manufacturing assets
  
  

Qualified Improvement Property (QIP):

Interior improvements to nonresidential buildings, such as:

• Renovations
  
  

• Interior upgrades
  
  

• Safety improvements
  
  

• HVAC, electrical, plumbing enhancements
  
  

Certain Off-the-Shelf Software

Businesses that invest in workflow systems, industry-specific software, accounting platforms, or other licensed digital tools continue to qualify.

4. Heavy Vehicles Still Qualify

Vehicles weighing over 6,000 pounds GVWR continue to qualify for an immediate Section 179 deduction when used primarily for business. This is commonly used by:

• Construction firms
  
  

• Transport operators
  
  

• Real estate professionals
  
  

• Service contractors
  
  

OBBBA maintains this business-friendly provision.

5. Bonus Depreciation and Section 179 Coordination

While Section 179 allows immediate expensing up to certain limits, bonus depreciation can apply to additional equipment beyond the Section 179 cap.

OBBBA maintains:

• The ability to combine Section 179 and bonus depreciation
  
  

• The ordering rules (Section 179 applied first, bonus depreciation second)
  
  

• Expanded flexibility for multi-year capital planning
  
  

This combination is extremely valuable for businesses making large capital investments.

Benefits of Section 179 Under OBBBA

1. Immediate Tax Savings

Deducting the full cost in the year of purchase lowers taxable income and enhances cash flow.

2. Encourages Investment

Updated limits support modernization of:

• Machinery
  
  

• Vehicles
  
  

• Technology
  
  

• Retail and office improvements
  
  

3. Supports Small and Mid-Sized Businesses

Section 179 is specifically designed for growing companies—not massive corporations—because of the phase-out threshold.

4. Planning Stability

With OBBBA’s enhancements, businesses can plan long-term capital purchases with confidence.

Requirements to Claim Section 179 Under OBBBA

To qualify for the deduction:

• Property must be used more than 50% for business

Personal use must be minimal.

• Property must be purchased (not leased)

Financed purchases qualify.

• Property must be placed in service during the tax year

It’s not enough to buy equipment — it must be operational.

• Deduction cannot exceed taxable income

But unused amounts can sometimes be carried forward.

Common Mistakes Businesses Make

• Claiming Section 179 on property not placed in service
  
  

• Misclassifying vehicles as over 6,000 pounds
  
  

• Forgetting the taxable-income limitation
  
  

• Neglecting bonus depreciation options
  
  

• Poor documentation for equipment use
  
  

• Failing to track mixed-use property properly
  
  

Our team ensures accurate qualifications and maximized deductions.

Tax Planning Strategies Under OBBBA (Z Tax & Accounting Recommendations)

1. Time equipment purchases strategically

Businesses can plan purchases to line up with profitable years to get the biggest benefit.

2. Use Section 179 for smaller purchases and bonus depreciation for larger investments

This maximizes immediate expensing while staying within limits.

3. Consider entity structure impact

S corporations, partnerships, and sole proprietors may see different outcomes.

4. Keep detailed asset logs and receipts

Documentation protects the deduction.

5. Evaluate vehicle choices

Choosing qualifying vehicles can create major deductions.

How Z Tax & Accounting Helps

Z Tax & Accounting provides:

• Section 179 deduction planning
  
  

• Bonus depreciation modeling
  
  

• Capital investment analysis
  
  

• Tax projections incorporating OBBBA rules
  
  

• IRS-compliant asset classification
  
  

• Multi-year investment and depreciation strategies
  
  

Our expert guidance ensures businesses capture every deduction available.

Conclusion

The One Big Beautiful Bill Act strengthens and modernizes Section 179 for 2025 and future years. With higher limits, better indexing, and expanded stability, businesses have more freedom to invest in equipment, vehicles, and improvements without waiting years for depreciation deductions.

To maximize benefits and avoid costly errors, businesses should consult an experienced tax professional.

Z Tax & Accounting is here to help you navigate Section 179 and optimize every tax advantage available under OBBBA.

Related Topics:           Research & Developmed costs per OBBBA          Qualified Business Income Deduction (QBID) per OBBBA          Meals Deduction for Fishing Industry per OBBBA          Depreciation (Section 179) Deduction per OBBBA          Bonus Depreciation per OBBBA          Commercial Clean Vehicle Credit under OBBBA          Energy Efficient Home Credit per OBBBA          Alternative Fuel Refueling Credit per OBBBA          New Markets Tax Credit (NMTC) per OBBBA          Farmland Capital Gains Installment Election under OBBBA          Employer Provided Childcare Credit under OBBBA          Dependent Care Assistance Progran (DCAP) under OBBBA          Employer Student Loans Contribution under OBBBA          Paid Family & Medical Leave Act (FMLA) under OBBBA          Transportation Fringe Benefits under OBBBA          Gifts & Inheritances (Estates) Exclusion amount per OBBBA          Qualified Tips Deduction per OBBBA          Qualified Overtime Pay Deduction per OBBBA          Car Loan Interest Deduction per OBBBA          New Senior Deduction amount per OBBBA          State & Local Deduction (SALT) limit per OBBBA          Casualty Loss Deduction per OBBBA          Qualified Residence Interest Deduction per the OBBBA          Mortgage Insurance Premium Deduction per OBBBA          Itemized Deduction Cap for top bracket earners per OBBBA           Charitable Contributions Deduction for Individuals per OBBBA           Gambling losses (wagering) limit per the OBBBA          The Child and Dependent Care Credit per OBBBA