Section 179 Expansion Under OBBBA: New $2.5M Cap
OBBBA raised the Section 179 dollar limitation to $2.5 million (from $1 million) and the phaseout threshold to $4 million (from $2.5 million). Eligible property includes tangible personal property, off-the-shelf software, QIP, and certain nonresidential real property improvements. The cap is indexed for inflation in subsequent years.
New dollar limitation
Section 179 dollar limitation under OBBBA: $2,500,000 per year. The taxpayer can expense up to this amount of qualifying property in the year placed in service, in lieu of depreciation.
Phaseout threshold: $4,000,000. Above this amount of qualifying property placed in service in the year, the $2.5M cap reduces dollar-for-dollar with the excess, reaching zero at $6.5M.
Eligible property
Tangible personal property used in a trade or business (equipment, machinery, furniture). Off-the-shelf software. Qualified improvement property (QIP) under Section 168(e)(6). Certain nonresidential real property improvements added by TCJA: roofs, HVAC, fire protection, alarm systems, security systems.
Residential rental real estate does not qualify for Section 179 because it is not a trade or business actively conducted under the standard required. Hotels, self-storage with substantial services, and operating businesses on real estate may qualify.
Interaction with bonus depreciation
Section 179 is taken first, reducing the property's basis. Bonus depreciation under Section 168(k) then applies to the remaining basis. Regular MACRS applies to what remains after Section 179 and bonus.
For 100% bonus on qualifying property, the order is largely academic because both Section 179 and bonus eliminate the basis in year one. The order matters when state conformity differs between the two regimes.
Frequently asked questions
- How does WeCostSeg coordinate with my CPA?
- Every engagement follows the three-touch CPA Coordination Protocol. Preliminary analysis CC'd to your CPA on intake, draft report shared five business days before final delivery, and Form 3115 filing coordinated when a Section 481(a) adjustment applies.
- Does OBBBA's 100% bonus apply to my acquisition?
- 100% applies to property under a binding contract on or after January 20, 2025 per Public Law 119-21. Property under a binding contract on or before January 19, 2025 stays on the legacy phase-down: 40% in 2025, 20% in 2026, 0% in 2027 and after.
- Is audit defense included?
- Yes. Every WeCostSeg engagement includes five years of written audit defense at no extra charge, aligned to the 13 Principal Elements of a Quality Cost Segregation Study under IRS Publication 5653 Chapter 4.
- Can I get a free preliminary analysis?
- Yes. Submit property details via the free proposal form or WhatsApp. Engineer-reviewed estimate returned within four business hours during US Eastern hours.
Zawwad Ul Sami, Founder
Zawwad Ul Sami is the founder of WeCostSeg, a founder-led cost segregation firm serving real estate investors across the US. He focuses on strategy, pricing, and the firm's overall direction.