Entity Setup
Entity Planning Under the One, Big, Beautiful Bill: First-Year Depreciation Goes 100%
Businesses now enjoy permanent, full first-year depreciation on qualifying property—learn how to capitalize on this under the new depreciation regime.
By NomadicTax Research Team • 5-8 min read • June 15, 2026
## The Policy Shift: Full First-Year Depreciation
Under the One, Big, Beautiful Bill (OBBBA), enacted July 4, 2025, Congress made major changes to **Section 168(k)** of the Internal Revenue Code. As of **January 19, 2025**, businesses can claim **100% additional first-year depreciation** for qualified property and certain specified plants—removing prior phase-out limits that used to restrict 100% deductions only through December 2026. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
## What Qualifies?
- **Qualified Property**: Includes tangible personal property like equipment, machinery, and most nonresidential property.
- **Specified Plants & Certain Aircraft** formerly under delayed timelines. OBBBA removes previous cutoff dates.
- There is also an **election option** for reduced deduction (40% or 60%, depending on the property) if that better suits your tax position during **first taxable year ending after Jan 19, 2025**. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
## Strategic Benefits for Entity Setup
- A startup purchasing heavy machinery in mid-2025 or later gets **full write-off** the year they place property in service—massive cash-flow boost.
- Entities planning to acquire expensive tangible assets (production equipment, manufacturing machinery) benefit most.
## Example Comparison
| Business A Scenario | Pre-OBBBA (Under Old Rules) | After OBBBA So You Can… |
|---|---|---|
| Produce medical-grade lab equipment, $1 million in property placed in service 2026 | Maybe only partial 100% (dependent on date), mixed rules, possible phase-out | Deduct $1 million upfront, accelerating depreciation and lowering taxable income immediately |
| Farm planting specified plants | Limited timing, phased eligibility | Full upfront deduction after Jan 19, 2025 |
## Actionable Advice for Entities
- **Audit Your Asset Acquisition Timeline**: If you plan to place property in service *after* Jan 19, 2025, ensure it qualifies and is ready to reduce taxable base.
- **Consider Cash Flow & Marginal Tax Rate**: Biggest gains happen if you're in higher brackets or investments are high-cost.
- **Review depreciation schedules and tax forecasting**: Accelerated deductions could impact AMT or state tax; make sure you’re modeling the change.
- **Work with your CPA on choosing the election** (if lower deduction is better for future year planning).
## Entity Structure Impacts
- Pass-through entities (LLCs, S-Corps) benefit directly; careful when partnerships or C-Corps—timing & basis matters.
- Tie in with Section 179 expense limits if relevant—but OBBBA’s depreciation change is separate and potentially larger for large property purchases.
- For real estate heavy entities, consider combining new depreciation deductions with cost segregation studies.
## Bottom Line
The OBBBA’s overhaul of first-year depreciation under Section 168(k) is one of the most powerful tools for business tax planning. Planning the acquisition schedule, optimizing entity structure, and properly applying this deduction can yield substantial tax savings and cash flow advantages.