On July 3rd, the "One Big Beautiful Bill Act (OBBBA)" passed, making impactful changes to the federal tax policy. But what does that mean for YOU and the manufacturing industry as a whole?
We've highlighted some key points so you can act fast.
Businesses can immediately expense qualifying assets placed in service after January 19th, 2025, eliminating the previously scheduled phase-down. This allows you to immediately expense 100% of the cost of qualified equipment purchased and in use after January 19th. This deduction is only for qualifying assets in the year of acquisition.
Previously, businesses were only allowed to immediately expense 40% of the cost for 2025, falling to 20% in 2026. However, this 100% expensing will remain in effect through 2029 under this bill.
Domestic research costs are now fully deductible under new Section 174A. This is allowing businesses to immediately deduct domestic research or experimental expenditures paid or incurred in taxable years beginning after December 31st, 2024 and before January 1, 2030.
Companies with capitalized domestic R&D expenses from 2022 to 2024 can elect a catch-up deduction, significantly improving cash flow for innovative companies.
Previously, businesses were required to deduct research or experimental expenditures over a five-year period, while international research was required to be deducted over a 15-year period.
Small businesses can expense up to $2.5 million in qualifying equipment, creating an expanded opportunity for equipment-heavy operations to write-off costs.
Previously, the cap for 2025 was $1,250,000 with 40% bonus depreciation.