💼 Section 179 Raised to $2.5M & Bonus Depreciation Back to 100% — A Practical 2025 Tax Playbook for Small Businesses
Beginning in 2025, the OBBBA legislation significantly reshaped how small businesses can expense major purchases.
The Section 179 deduction is expanded to $2.5 million, and Bonus Depreciation once again offers a full 100% first-year write-off.
These updates give business owners new flexibility in planning equipment upgrades, cash-flow management, and long-term tax positioning.
- 1️⃣ Quick Overview of the 2025 Changes
- 2️⃣ Understanding the New $2.5M Section 179 Limit
- 3️⃣ What Qualifies for Section 179 in 2025?
- 4️⃣ Section 179 vs. 100% Bonus — Updated Comparison
- 5️⃣ Five Tax Strategies EAs Should Consider
- 6️⃣ Realistic Savings Examples
- 7️⃣ Frequently Asked Questions
- 8️⃣ External & Internal Reference Links
1️⃣ Quick Overview of the 2025 Changes
The 2025 updates provide a powerful incentive for business reinvestment. Key changes include:
- Section 179: Deduction limit increased from roughly $1.3M to $2.5M.
- Phase-out: Begins once total asset purchases exceed $4M.
- Bonus Depreciation: Restored to 100% expensing starting in 2025.
This can increase taxable income in later years when depreciation is no longer available.
2️⃣ Understanding the New $2.5M Section 179 Limit
Section 179 allows businesses to deduct the full cost of qualifying property in the year it is placed in service.
The 2025 enhanced limits operate as follows:
• Deduction limit: $2,500,000
• Phase-out threshold: $4,000,000
• Dollar-for-dollar reduction once purchases exceed $4M
• Deduction eliminated at approximately $6.5M in total purchases
3️⃣ What Qualifies for Section 179 in 2025?
Eligible assets include a wide range of business property, such as:
- Manufacturing and production equipment
- Computer systems, servers, and networking hardware
- Office furniture and fixtures
- Heavy SUVs and trucks (over 6,000 lbs GVWR)
- Commercial-use software
- Certain security systems and building improvements
4️⃣ Section 179 vs. Bonus Depreciation (100%)
| Category | Section 179 | Bonus Depreciation |
|---|---|---|
| Deduction Limit | $2.5M cap | No cap |
| Income Restriction | Cannot exceed taxable income | No income limitation |
| Used Assets | Allowed | Allowed |
| Order of Application | 179 → Bonus → MACRS | Applied after 179 |
5️⃣ Five EA-Level Strategies for 2025
- Accelerate equipment purchases to take advantage of 100% bonus in 2025.
- Manage total annual purchases to avoid crossing the $4M phase-out threshold.
- For Schedule C losses: bonus depreciation may offer a better result than Section 179.
- S corporations: confirm reasonable compensation before allocating deductions.
- Check state conformity: several states decouple from federal bonus depreciation.
6️⃣ Realistic Savings Examples
• Taxable income before deduction: $260,000
• Section 179 allowed: $260,000
• Remaining $160,000 eligible for 100% bonus
👉 Total deduction: $420,000 → Tax savings: approx. $117,600
• Entire cost eligible under Section 179
👉 Estimated tax savings: about $570,000
7️⃣ Frequently Asked Questions
Q1. Are passenger vehicles eligible for full expensing?
No. Luxury Auto Limits apply to most passenger vehicles. Heavy SUVs over 6,000 lbs follow different rules.
Q2. Can leased property qualify for Section 179?
Most leases do not qualify. Ownership is typically required.
Q3. What is the correct order for depreciation deductions?
Section 179 is applied first, followed by bonus depreciation, and finally standard MACRS depreciation.
8️⃣ External & Internal Reference Links
This article is based on federal tax law as of 2025, including relevant OBBBA provisions.
State tax rules may differ, and individual tax outcomes vary depending on business structure and income level.