Small business owners have a powerful new tool to write off the full cost of improvements to their commercial properties — and it's hiding in plain sight in the updated Section 179 rules under the One Big Beautiful Bill.
What Changed?
Section 70412 of the OBBB (2025) makes two key updates to IRC §179:
Permanent Inflation Indexing: The expensing limit (previously capped at $1.16 million in 2023) is now indexed for inflation permanently, starting in 2026.
Expanded Definition of Qualifying Property: Section 179 expensing continues to apply to nonresidential real property improvements — including:
Roofs
HVAC systems
Fire protection and alarm systems
Security systems
Other leasehold improvements
This expanded treatment was originally introduced under the PATH Act and made more accessible in the TCJA. The OBBB cements these enhancements as permanent fixtures in the code.
Why It Matters for Real Estate-Heavy Businesses
If your business owns or leases commercial property, you can now:
Deduct the full cost of eligible improvements in the year they're placed in service
Avoid depreciation schedules stretching 15–39 years
Potentially eliminate taxable income with the right timing and planning
And unlike bonus depreciation, Section 179 lets you choose which assets to expense — giving you surgical control over your deduction strategy.
Planning Strategies You Should Consider
Layer with Bonus Depreciation:
Use Section 179 first to target specific assets, then apply 100% bonus depreciation (under IRC §168(k)) to anything that remains. This lets you front-load your write-offs efficiently.
Tenants Can Benefit Too:
Tenants who pay for qualified leasehold improvements can claim Section 179 deductions, even if they don’t own the building. This is especially useful for salons, restaurants, and gyms doing buildouts.
Timing Is Everything:
Section 179 is subject to annual limits. Place qualifying property in service before year-end to accelerate deductions while your business is still profitable.
Watch the Phase-Out:
The deduction begins to phase out dollar-for-dollar after total equipment purchases exceed ~$2.8M (indexed). For larger businesses, consider spreading purchases across years or shifting strategy to bonus depreciation.
Real-World Example
A San Diego gym installs a $70,000 HVAC system and a $45,000 roof upgrade in 2026.
Under old rules: 39-year depreciation = ~$2,900/year deduction
Under new rules: Entire $115,000 deducted in Year 1 using Section 179
This reduces taxable income immediately — freeing up cash to reinvest in equipment, marketing, or staff.
Code Reference
IRC §179(d)(1)(B) – Expanded to include improvements to nonresidential real property
OBBB §70412 – Makes inflation indexing and prior expansions permanent
Bottom Line
You no longer have to slowly depreciate that new roof or HVAC system over decades. Section 179 lets you deduct it all at once — if you plan ahead.
If you're a landlord, tenant, or real estate-heavy business, the new rules are your green light to reinvest — and deduct every penny.
Need help modeling a major property improvement project or building out a tax-efficient renovation strategy? Let’s talk. We’ll make sure you optimize the deduction mix — and keep every receipt Hedgi AI needs to get it right at tax time.