Corporate tax: OBBBA’s 100% bonus depreciation fuels investment

The One Big Beautiful Bill Act (OBBBA) restored 100% bonus depreciation, allowing qualifying property acquired and placed in service after January 19, 2025, to be fully expensed in the year of acquisition. The change was enacted with the law’s signing on July 4, 2025, and IRS guidance and tax-advisor bulletins have clarified eligibility and timing for affected assets.

Practically, the provision covers a range of short-lived tangible assets—certain machinery and equipment, qualified production property and specified interior improvements—and works alongside expanded Section 179 limits and R&D expensing that were included in the same package. Tax firms and advisory groups note the immediate impact is a front-loaded tax deduction that improves near-term cash flow for firms making capital investments.

Market analysts say the restoration of full expensing improves corporate liquidity and can incentivize firms to accelerate planned capital expenditures, particularly in manufacturing, defense supply chains and other capital-intensive sectors. Investment banks and wealth managers have modelled scenarios where lower effective tax burdens translate into higher free cash flow and, in some sectors, faster deployment of capex budgets.

At the macro level, watchdogs and nonpartisan budget analysts caution that making such tax preferences permanent carries significant fiscal costs and distributional consequences. Several independent estimates highlight a sizeable impact on federal revenues over the coming decade, prompting debate about offsets and state conformity rules that will affect how firms claim benefits on state returns.

Looking ahead, market expectations remain mixed: in the near term investors and corporate treasuries may price improved cash flow and earlier capex, while longer-term outcomes will depend on whether increased investment productivity materializes and how policymakers address fiscal trade-offs. For corporate finance teams the priority will be to integrate the restored bonus depreciation into capex timing, tax provisioning and earnings guidance, while investors will monitor actual capex execution and any shifts in sectoral profit margins.