The One Big Beautiful Bill Act (OBBB) was officially signed into law on July 4, 2025, by President Trump and brings changes to how businesses can report their capital expenditures and their research and development (R&D) costs. A few provisions in particular, bonus depreciation, Section 179 immediate expensing of capital expenditures and Section 174, also known as the research and development deduction treatment, provide real estate and construction businesses with additional tax-saving opportunities.
Bonus Depreciation and IRC Section 179 Expense Limit
The OBBB restores 100% bonus depreciation for assets that were acquired after January 19, 2025. These assets qualify for a reinstated, 100% bonus depreciation. Assets acquired or assets that have contracts that began before January 19, 2025, will be subject to the former lesser 40% bonus depreciation.
In addition to bonus depreciation, the Section 179 expense limit has been expanded to $2.5 million with a $4 million phaseout for properties placed into service after December 31, 2024. There are no changes to the $31,300 limitation for the Section 179 deduction for sports utility vehicles for the 2025 tax year. There are also no changes to what qualifies as Section 179 property. The Section 179 deduction remains limited by taxable income and cannot be taken when the business is operating at a net loss.
IRC Section 174 Treatment of Research and Development Expenditures
The OBBB has restored the full deduction of domestic Section 174 expenditures. No matter the size of their business, all taxpayers can elect to deduct any domestic R&D expenditure rather than the previous mandatory requirement under TCJA of capitalizing and amortizing the R&D costs over a 5-year period. This change is retroactive to the 2022 through 2024 tax years. Going forward, 2025 tax returns and onward will not require a special election to deduct domestic R&D expenditures.
Certain small businesses with average gross receipts over the prior three tax years (2022 through 2024) that are less than $31 million have options to implement these changes:
- Amend their 2022 through 2024 tax returns to deduct their research and development costs
- Elect to accelerate amortization of any unamortized amounts from those tax years in 2025
- Elect to accelerate amortization of any unamortized amounts from those tax years across the 2025 and 2026 tax years.
Large businesses with average gross receipts over the prior three tax years (2022-2024) greater than $31 million do not qualify to amend their 2022-2024 tax returns. However, they can choose to accelerate any remaining unamortized costs from those tax years in 2025 or across the 2025 and 2026 tax years.
Taxpayers that have foreign R&D costs must follow the TCJA Section 174 rules, which require the R&D costs to be capitalized and amortized over a 5-year period.
Anders Real Estate advisors are closely following the impact the OBBB creates across the industry and the opportunities it presents for our clients. Learn more about how our insights into evolving legislation can provide value for you, and the associated cost, request a meeting below.