Code Section 179 (fast equipment write-off) expansion

For qualifying property placed in service in tax years beginning after December 31, 2024, the OBBB increases the maximum amount a taxpayer may expense under Code Sec. 179 to $2,500,000 (double the $1,250,000 limit under prior law), reduced dollar for dollar by the amount by which the cost of qualifying property exceeds a phaseout threshold of $4,000,000 (up from $3,130,000 under prior law). The $2.5 million limit and the $4 million phaseout threshold are adjusted for inflation for tax years beginning after 2025.

The definition of “qualifying property” is unchanged. As under prior law, it is generally defined as depreciable tangible personal property, off-the-shelf computer software and qualified real property that is purchased for use in the active conduct of a trade or business. Also unchanged is the Code Sec. 179 dollar limitation for SUVs, which is $31,300 for tax years beginning in 2025.

Bonus depreciation

Prior law: Under rules enacted by the TCJA, bonus depreciation was scheduled to be repealed for property placed in service after 2026, culminating a multi-year phaseout of the deduction. Under these rules, the applicable bonus depreciation percentage was 60 percent for property placed in service in 2024, and 40 percent for property placed in service in 2025.

The OBBB permanently increases the applicable bonus depreciation percentage to 100 percent for all qualified property acquired after January 19, 2025. Taxpayers may elect to use the prior law 40% bonus for 2025.

Qualifying farm land sales

The OBBBA enacted new Code Sec. 1062, which allows taxes on capital gains from the sale or exchange of qualified farmland property to a qualified farmer to be paid in four equal annual installments, beginning on the unextended due date of the tax return for the tax year in which the sale or exchange occurred.

“Qualified farmland property” generally means real property located in the United States which has been used by the taxpayer as a farm for farming purposes or leased by the taxpayer to a qualified farmer for farming purposes during substantially all of the 10-year period ending on the date of the sale or exchange.

“Qualified farmer” means any individual who is actively engaged in farming (within the meaning of subsections 4 (b) and (c) of section 1001 of the Food Security Act of 1986).

The provision is effective for sales or exchanges in tax years beginning after July 4, 2025.