What is the One Big Beautiful Bill, and How Can SMEs benefit from 100% Bonus Depreciation?

The 'One Big Beautiful Bill' (OBBBA) has been positively influencing US tax reforms. Especially, the 100% bonus depreciation for qualified assets has become an excellent opportunity for SMEs (small to medium enterprises) in many ways. 

This blog explains what it is, how SMEs can benefit from this bill, and how our Client Advisory Services practice can help them maximize its benefits.

What is the One Big Beautiful Bill?

United States (US) President, Donald Trump, signed the 'One Big Beautiful Bill' (OBBBA) into law on July 4, 2025, the US Independence Holiday. This bill brings a significant overhaul to some important US tax rules. The permanent restoration of 100% bonus depreciation is one of the key changes introduced by this bill. This bill reverses the earlier scheduled phaseout. 

Earlier, the bonus depreciation was in a gradually declining order, with 80% in 2023 and 60% in 2024, and so on. Now, the OBBBA removes the phaseout and makes the full expenditure of qualifying assets a permanent part of the tax code. This permanent tax code applies to properties that have a recovery period of 20 years or less. 

The law also increases the Section 179 tax deduction limit to $2.5 million, with a phaseout starting at $4 million. There have been other key changes, including:

• Enhanced deduction rules for research and development (R&D) spending.
• Permanent extension of the Qualified Business Income (QBI) deduction (set at 20% for pass-through entities).

What are some Big Benefits of 100% Bonus Depreciation for SMEs?

Improved Cash Flow with Immediate Tax Relief

SMEs can deduct the cost of assets (placed in service) in the same year, instead of depreciating the asset's cost over several years. Therefore, SMEs can now report lower taxable income and enjoy the freedom to invest more in business growth.

Investments in Technology, Capital, and Growth Incentivized

Buying equipment, computers, software, and machinery to generate future revenue and increase efficiency is made more practical for SMEs since 100% bonus depreciation compensates the procurement. The tax reform helps SMEs accelerate their modernization plans and aspirations.

Synchronization with Section 179 Tax Deduction

Section 179 remains a viable tool for SMEs to make smaller purchases that don't qualify or are beyond phaseout limits. SMEs can combine the benefits of expanded Section 179 tax deductions along with the OBBBA for more flexibility and optimum tax savings.

Enhanced Certainty for Planning

As the OBBBA makes the tax benefits permanent, SMEs no longer need to worry about temporary tax breaks that may expire or change frequently. Therefore, SMEs don't need to fear abrupt changes in tax rules and can properly build capital budgets and investment strategies.

How Can SMEs Implement This?

Step 1: Identify Qualifying Assets

Tangible property assets acquired after January 19, 2025, and placed in service thereafter, with a recovery period of up to 20 years, qualify for 100% bonus depreciation. This criterion includes computers, off-the-shelf software, equipment, machinery, and some capital improvements.

Step 2: Prioritize Timing and Coordination

It is crucial to determine when to put an asset into service, as this impacts its eligibility. SMEs can work with Client Advisory Services that map their acquisition schedules to avoid cutoffs and elect transitional treatment as necessary.

Step 3: Proper Cost Segregation

A well executed cost segregation study can separate a building's components into shorter useful life and qualify for bonus depreciation and/or Section 179. The study helps SMEs utilize these two tools cleverly for tax savings. 

Why Edom & Co. CPAs Are Your Right Partners?

Opting for our business tax preparation services can be a crucial strategic decision for SMEs as we help them:

• Categorize and document the assets to keep our clients audit ready, while maximizing tax savings.
• Model multiple future tax scenarios to determine the optimal timing for asset procurement.
• Plan and achieve tax savings by utilizing Section 179, the OBBBA, or by combining both.
• Assist SMEs in investing into assets wisely, rather than procuring unnecessary capital allocations for tax deductions.   

Frequently Asked Questions (FAQs)

What assets qualify for 100% bonus depreciation under OBBBA?

The OBBBA allows for the deduction of tangible assets, including machinery, equipment, furniture, computing equipment, and off-the-shelf software, with a 100% bonus depreciation. 

Opting for our Client Advisory Services will enable SMEs to reap these benefits. Edom & Co. CPAs can connect clients with providers of in-depth cost segregation studies that help identify and qualify a building’s components and/or improvements. 

When should SMEs place an asset in service to qualify?

Notably, the assets procured after January 19, 2025, and placed in service thereafter can qualify for 100% bonus depreciation. Assets acquired before this date may be eligible for partial bonus depreciation.

Can an SME use both 100% bonus depreciation and section 179 in the same year?

Yes, it is possible. You can use Section 179 tax deduction as permissible by law if you have assets that do not qualify for bonus depreciation (and/or surpass the Section 179 limit). Through our business tax preparation services, we help SMEs maximize these benefits together for optimum upfront tax deductions and savings. 

How can one know whether to accelerate deductions or spread them over time?

We analyze the strategic impact of accelerating or spreading tax deductions, weighing your current and future taxable income against the risk of losing deductions entirely. Edom & Co. CPAs provide customized forecasting models, empowering you to make informed, data driven decisions that can maximize tax savings.