Nine ways the “One Big Beautiful Bill Act” (OBBBA) aims to boost manufacturing

By Brian Kutz, CPA and John Allen, CPA

The “One Big Beautiful Bill Act” (OBBBA) provides tax incentives to boost manufacturing investment and expansion.

Here are nine key provisions of the bill:

1. 100% bonus depreciation reinstated and expanded

The OBBBA permanently reinstates 100% bonus depreciation for eligible property acquired and placed in service after January 19, 2025, allowing full cost deduction in the purchase year.

• For assets placed in service between Jan. 1 and Jan. 19, 2025, a 40% bonus depreciation rate applies.
• Bonus depreciation generally applies after the Section 179 deduction is taken (see #3 for more on Section 179 deductions)

2. Bonus depreciation for Qualified Production Property

A new category — Qualified Production Property — is eligible for 100% bonus depreciation. This covers nonresidential property used for manufacturing and production.

• Construction must start between January 19, 2025, and December 31, 2028, and property must be placed in service before January 1, 2031.
• Property must be newly constructed, used in qualified production activity, and located in the U.S. or its territories.
• Taxpayers must make an election for this depreciation on their return.

3. Section 179 Expensing limits significantly increased

Section 179 expensing amounts are doubled for immediate equipment write-offs.

• Deduction limit: Increased from $1.25 million (2025 inflation-adjusted) to $2.5 million.
• Phase-out threshold: Raised from $3.13 million to $4 million. Both thresholds will continue to be indexed for inflation in future years.
• Time frame: These updates apply to property placed in service in tax years beginning after December 31, 2024.

Manufacturers can now more easily expense equipment in the year placed in service.

4. Full expensing for domestic research & development (R&D) restored

OBBBA restores full immediate expensing for domestic research & experimental (R&E) costs after 2024.

• Domestic R&E costs and software development expenses can be fully deducted the year incurred.
• Small businesses (with average annual gross receipts of $31 million or less) may deduct previously capitalized R&D expenses for tax years after 2021. Larger businesses can deduct those costs over one or two years.
• Foreign R&D expenditures still must be amortized over 15 years.
• Taxpayers may elect to continue amortizing domestic research and experimental (R&E) costs over a period of not less than 60 months, providing flexibility in planning.

5. Temporary deduction for qualified overtime pay

A temporary deduction for qualified overtime pay is available from 2025–2028.

• Deduction limit: Up to $12,500 per individual or $25,000 for married couples filing jointly.
• Income limits: Phases out for Modified AGI over $150,000 ($300,000 joint).
• Applies only to overtime pay mandated by the Fair Labor Standards Act (FLSA).

This is a deduction on the individual income tax return — it doesn't affect paycheck withholding but reduces overall tax liability.

6. Expanded business interest deduction using EBITDA

OBBBA allows companies to use EBITDA to calculate business interest deduction, boosting deductions for manufacturers.

• Effective for tax years beginning after December 31, 2024.
• Allows for the addback of depreciation and amortization, which was previously not included.
• This change results in a larger interest deduction for capital-intensive businesses like manufacturers.

7. Sunset for energy-efficient commercial building deduction

The bill terminates the energy efficient commercial building deduction (Section 179D) for projects beginning construction after June 30, 2026.

Businesses considering energy-efficient upgrades should begin construction before the mid-2026 deadline to qualify.

8. Advanced manufacturing production credit increased, with new restrictions

The Advanced Manufacturing Production Credit under Section 45X is modified:

• The OBBBA increases the tax credit from 25% to 35% for property placed in service after December 31, 2025.
• Qualifying products include solar and wind energy components, inverters, qualifying battery components, and critical minerals
• New restrictions: Taxpayers considered foreign-influenced entities or specified foreign entities cannot claim the credit.

9. Expensing for U.S.-based sound recordings

The OBBBA extends special expensing treatment to qualified sound recordings:

• Applies to productions starting in tax years ending after July 4, 2025.
• Recordings must be produced and recorded within the United States.
• Expenses capped at $150,000 per qualified production.
• Available only for productions starting before January 1, 2026.

Bottom line

The One Big Beautiful Bill Act introduces significant tax incentives for manufacturers, such as expanded depreciation, revived R&D expensing, and targeted credits. To maximize these benefits and ensure compliance with new regulations — some of which take effect this year — consult with the Boyer & Ritter manufacturing team for guidance tailored to your business needs.