This one grabbed headlines for business owners. At Anomaly, we are steely eyed on finding ways to quickly utilize the tax law changes to your business or real estate portfolio. Be careful with the media articles as they are convoluting 179 and 168k.

Congress restored 100% bonus depreciation for qualified property that you acquire and place in service after January 19, 2025. Property in service before that date stays on the old phase-down schedule.

Further, Section 179 was expanded. For 2025 the maximum deduction was DOUBLED to $2,500,000. 

A brand-new Section 168(n) gives a separate 100% write-off for “qualified production property.” Think domestic manufacturing or production facilities and certain nonresidential real property improvements tied to production activity. This one is nuanced and likely won't apply to many. 

A common question our team gets is: What is the difference between 179 and Bonus? Well, its technical but bonus is more flexible and can wipe out all income while 179 has caps. If you have $500k of profit and a $700k asset purchase, 179 stops you at $0 while bonus allows you to write off the full $700k.

Typically, we make this decision with you in the tax prep process as it is highly nuanced and technically. 

We use Section 179 when you need precision and state conformity. You can pick specific assets, choose the dollar amount, and avoid creating a loss you cannot use because 179 is limited by taxable income at both the entity and owner levels. Some building components qualify for 179 even if they do not fit bonus or QIP.

We will use bonus when you want speed and scale. There is no dollar ceiling and no income limit. If your total spend blows through the 179 phase-out or you simply want a full write-off without micromanaging assets, bonus is usually cleaner. Remember: once you take bonus for a class of property, it applies to every asset in that class unless you elect out.

Remember - this does NOT matter if you 100% finance the auto OR you pay in cash. The bonus depreciation is the same. Many business owners like to leverage the asset close to year end to preserve cash and get the large deduction, but there are many factors that go into this decisions.
 

Other business assets have less stringent requirements. MOST business assets (equipment etc) will fully qualify for 100% bonus depreciation. 

If you materially participate in a short term rental (average stay of seven days or fewer or you hit our material participation tests), 100% bonus lets you front-load deductions for furniture, appliances, and cost-segregated components. 

Again, you can finance or buy in cash...the bonus works the same! In either case, you must use a Cost Segregation Study to break out the component parts for bonus.

Anomaly offers Cost Segregation Studies which you can sign up for HERE once you have identified a property.

Buying your OWN building to operate out of just became more beneficial. If you are able to acquire a building to operate of, we will use a special election to maximize your tax ROI. Grouping the real estate (separate LLC) and the building as one activity allows us to bypass the dreaded passive loss rules. The combined activity becomes nonpassive which means we can use 100% bonus or 179 from improvements. We MUST make this election in year 1.

Consider using the SBA 504 Loan program to acquire your business real estate...it is pretty easy!

If you qualify as a real estate professional and materially participate, depreciation from rentals (including bonus and 179 on components carved out by a cost seg) can offset wage or business income. We are back to 100% depreciation so REPS status will become more popular. 

Have a nonworking spouse? You may consider structuring activities so the nonworking spouse can become a REP and avoid passive activity rules on all of your real estate acquisitions. Reach out for more on this strategy. 

Section 168(n) allows a 100% deduction for qualified production property. Key points for planning: