On July 4, 2025 President Trump approved the 2025 tax reform into law, known as H.R. 1. Republicans’ “One Big Beautiful Bill.” One of the most important provisions is the permanent reinstatement of 100% bonus depreciation, providing a long term clarity for capital investment and tax planning strategies.
Key Takeaway
H.R. 1, largely shaped by the Senate’s provisions to guarantee bonus depreciation is a significant win for taxpayers who are planning major investment projects, or real estate investment. By ensuring the 100% bonus depreciation rate by raising section 179 thresholds, adding the full deduction of certain commercial buildings, as well as establishing an explicit timeframe to end section 179D, this drastically changes the tax strategies for 2025 and beyond.
Trump Tax Bill Bonus Depreciation Changes
The Senate version of the bill, ultimately approved through the House and subsequently signed by President Trump, marks an important change by adding a 100% depreciation bonus provision for qualified property placed into service after the 19th of January 2025. This effectively eliminates the phase-down which was set in the Tax Cuts and Jobs Act (TCJA) of 2017.
In the initial TCJA, bonus depreciation was fixed at 100% from 2022. It was then set to drop by 20% per year. In 2025, companies faced only a 40% write-off in the first year, with a complete phase-out on the horizon. The Senate-driven clause of the bill reversed that trend by restoring the full incentive for indefinitely.
Impact on Cost Segregation Studies
Cost segregation studies are a tax-efficient strategy that allows taxpayers to accelerate depreciation deductions on real estate investments. The study breaks down the cost of a building into parts which can be depreciated over shorter periods of recovery (typically 5, 7, or 15 months) rather than the typical 27.539-year or 27.5 or 39-year timeframes. This shifts the majority of investments into categories that qualify for acceleration depreciation, which increases tax deductions for early years and enhances cash flow.
Why a Cost Segregation Study Is Now More Valuable
With the bill’s permanent 100% bonus depreciation, each dollar converted into short-life modified accelerated cost recovery systems (MACRS) property as a result of cost segregation studies can be deducted fully within the first year. This allows for large upfront deductions that were in danger of being reduced under the previous law.
Enhanced IRC Section 179 Expensing
H.R. 1 also increased the IRC Section 179 cap up to $2.5 million, which allows businesses to instantly expense more qualified property. This is particularly beneficial for investments that are smaller, personal property additions and purchases of equipment.
In conjunction with cost segregation as well as bonus depreciation, Section 179 is applicable to purchases of smaller assets (up to its limit) and cost segregation grants more deductions, accelerating the depreciation of structural components that is eligible for 100% bonus treatment.
New 100% Depreciation for Certain Qualified Production Property
Another notable aspect of the tax reforms is the inclusion of a new 100% first-year depreciation deduction for commercial real estate that is used for the production of qualified production activities. Qualified production properties (QPP) can be defined as a component of nonresidential real estate used by the taxpayer as an integral component of a production activity that is qualified.
In keeping with the overall goal of reshoring production towards the United States, QPP must be able to meet a number of requirements, including:
- It is required to be placed service within the United States
- Its original use must commence with the taxpayer
- Start construction after the 19th of January, 2025 and finish by 30th of the year 2030
- Be put into service by 2031
This rule is anticipated to be beneficial to manufacturing and production businesses planning to build or improve manufacturing facilities across the United States by allowing the taxpayer to deduct all construction costs within the first year.
While this law provides significant advantages, it’s also targeted only taxpayers who meet all qualified production activity criteria are eligible. Businesses that could be eligible are those that produce goods, operating industrial facilities or manufacturing components as well as final products. An in-depth analysis of the project’s scope as well as timing and usage is vital to determine whether a company is eligible for this significant first-year deduction.
Tax Planning Implications for 2025 and Beyond
It is essential to plan ahead in 2025, when the tax reform will create a new and exciting landscape for real estate owners as well as businesses:
- Depreciation that is 100% guaranteed means no tax ambiguity or racing deadlines .
- The higher limit in Section 179 helps to maximize write-offs on smaller personal investment in property.
- Cost segregation studies can be even more persuasive, because the majority of constructed components that are reclassified as building elements can be deducted in full upfront.
- A new 100% production allowance real estate opens the way for massive deductions during the first year for manufacturing heavy projects.
Next Steps To Guide You Forward
To get the most value from the tax reform provisions of 2025, businesses should begin planning in advance to be ready for important deadlines and maximize available incentives:
- Take into consideration cost segregation studies as early as possible, according to the law change every dollar of property with a short life could be eligible for a prompt write-off.
- Take advantage of the new production property rules if investing in manufacturing-related facilities.
