3 Big Benefits of the Budget Reconciliation Bill for Manufacturing and Material Handling Operations

If you’ve been debating whether to invest in new equipment or expand your facility, the new budget reconciliation bill has made these upgrades more affordable through:

• Expanded Section 179 Deduction Limits
• Accelerated, 100% Depreciation is Back
• Incentives for Facility Construction
• Favorable Changes to the Interest Expense Deduction

In short, companies can immediately write off equipment and new construction. Doing so reduces your 2025 tax bill, which improves cash flow. Keep reading to learn more about how to take advantage of the new tax rules established by the 2025 budget reconciliation bill.

Expanded Section 179 Deduction

One of the most impactful changes is the return of 100% depreciation under Section 179. The budget also increased the cap from $1.25 million to $2.5 million. 

What is Section 179?

Instead of using straight-line depreciation to deduct equipment purchases over many years. Section 179 allows operations to depreciate and deduct purchases faster, aka accelerated depreciation. Prior to the budget reconciliation bill, only 60% of the equipment purchase price was eligible for accelerated depreciation. 

Now, any equipment placed in service on or after January 1, 2025, is eligible for a 100% deduction — up to $2.5 million. The equipment can be purchased, financed or leased.

Note: Accelerated depreciation deductions apply to federal taxes only, not state corporate taxes in Georgia or Florida.

Summary of Changes to Section 179:

• The limit has now doubled to $2.5 million, with a phase-out threshold of $4 million. 
• Accelerated depreciation increases from 60% to 100% of the purchase price.

What types of equipment qualify for the Section 179 deduction?

Eligible items include new and used:

• Forklifts 
• Aerial lifts
• Loading dock equipment
• Warehouse racking
• Conveyor systems
• Warehouse automation hardware
• Electric utility vehicles
• Corporate vehicles used for business
• Industrial cleaning equipment
• Office equipment and computer hardware

Changes to Interest Expense Deduction

The bill restores the more favorable EBITDA-based limitation for deducting interest expenses. Meaning: businesses can deduct interest expenses based on earnings before depreciation and amortization. 

For capital-intensive operations:

• This is a more accurate measure of financial capacity.
• The change increases the amount of deductible interest.

Operations can take advantage of this change starting in tax year 2025. For more information about these changes and how they might impact your business, please consult a tax professional and ask about the changes to Section 163(j).

New Construction and Depreciation Incentives for Manufacturing

The reconciliation bill has two incentives for U.S.-based manufacturers to expand their operations.

#1 Section 168(n) allows businesses in production-driven industries to write off the full cost of equipment the same year the equipment is purchased (100% deduction) through 2032.  

#2 Companies can also deduct the entire cost of building and equipping a “Qualified Production Property” the year construction is completed. 

Qualified Production Property (QPP) includes “nonresidential real property used as an integral part of a qualified production activity, such as manufacturing, production or refining of tangible personal property.”

Construction must start after January 19, 2025, and before January 1, 2029. The facility must be placed into service before January 1, 2031.

Qualifying expenses include:

• Buildings and major structural improvements
• Racking systems
• Conveyors 
• Automation hardware

Jay Timmons, president and CEO of the National Association of Manufacturers, said the bill delivers the kind of certainty business leaders need to move forward with major purchases.

“Frankly, I think all businesses will benefit from this [bill]. The certainty it provides, especially for small manufacturers…folks that are part of the supply chain…is really critical. I’ve heard from so many over the years that they really want to make investments, but they're just a little concerned that the tax policies weren't going to be renewed, or that the regulatory regime was going to be too expensive for them. So all of those small businesses, I think, will benefit greatly.”

Questions? We Have Answers

Though we can’t answer any tax questions, we can help you maximize the opportunities presented by the new legislation. If you’re considering new or used material handling equipment, a facility expansion or a new investment in automation, we’re here to answer any questions you may have.

We’re committed to helping you get the job done right: on time, on budget with equipment that’s a good fit for your operation. We won’t sell you something you don’t need because we want to be your long-term partner in success. 

Contact us online, by phone at (800) 226-2345 or in person at one of our ten locations throughout Georgia and Florida

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Disclaimer: We’re material handling experts, not tax experts. Please consult your tax professional to ensure purchases comply with the new tax laws.