The 2025 tax reform, known as the One Big Beautiful Bill Act (OBBBA), delivers a significant boost to U.S. manufacturers by expanding bonus depreciation and related expensing provisions. For companies that rely on heavy capital investment, these updates provide immediate tax relief, accelerate cash flow, and encourage reinvestment.

Permanent 100% Bonus Depreciation

Previously, bonus depreciation under the Tax Cuts and Jobs Act (TCJA) was scheduled to phase down to 40% in 2025, with further reductions in later years. The new law cancels that phase-down and permanently restores 100% bonus depreciation.

This means manufacturers can immediately expense the full cost of qualified assets, such as machinery and equipment, and qualified improvement property in the year they are placed in service. The result is faster write-offs, stronger short-term cash flow, and more flexibility in planning future capital expenditures.

Expensing for Production Facilities

The law introduces a new category, Qualified Production Property (QPP), which allows manufacturers to fully expense the cost of new facilities used directly in production. To qualify, construction must begin after January 19, 2025, and the property must be placed in service by the end of 2030.

For manufacturers building new plants or expanding existing facilities, this provision offers the unprecedented opportunity to deduct the entire cost of a factory in a single year.

R&D Expensing Restored

Alongside bonus depreciation, the law reinstates immediate expensing for domestic research and experimental (R&D) costs, reversing prior rules that required amortization. Businesses may also deduct unamortized R&D balances from earlier years, providing a fresh opportunity for refunds or reduced liabilities.

This change is particularly valuable to manufacturers investing in product innovation, automation, and new technologies.

Enhanced Section 179 Expensing

Section 179 expensing, often used by small and mid-sized businesses, has also been expanded. For 2025, the maximum deduction increases to $2.5 million, with a phase-out threshold of $4 million. Section 179 works well in situations where bonus depreciation does not apply or when businesses want greater control over which assets are expensed.

Financial Impact for Manufacturers

Together, these provisions reshape the economics of manufacturing investment:

• Stronger cash flow: Immediate deductions free up capital for reinvestment, debt reduction, or workforce development.
• Incentives for domestic growth: Expensing for factories directly encourages onshoring and modernization of U.S. facilities.
• Tax planning flexibility: With multiple expensing options, manufacturers can tailor deductions to match their income profile.

Next Steps

Manufacturers should work with tax advisors now to:

1. Update capital expenditure budgets to take advantage of 100% expensing.
2. Align construction timelines with the QPP deadlines.
3. Revisit past and current R&D investments for potential deductions.
4. See how bonus depreciation and Section 179 can work together to alleviate taxable income across years.

Contact Us Today

Taking proactive steps now can position your manufacturing business to fully leverage these new tax advantages. Call us at 203-489-0612 to discuss how these changes impact your plans

Written by: Benjamin Errington