The "Small Business Growth Act" increases the limit on expensing depreciable business assets for taxable years starting after December 31, 2025, raising the expensing limit to $2,000,000 and the investment limitation to $3,500,000.
Blake Moore
Representative
UT-1
The "Small Business Growth Act" increases the amount small businesses can deduct for depreciable assets, incentivizing investment in equipment and technology. It raises the expensing limit to $2,000,000 and the investment limitation to $3,500,000, adjusting the base year for inflation adjustments to 2026. These changes apply to property placed in service in taxable years beginning after December 31, 2025.
Small Business Growth Act Doubles Expensing Limit to $2 Million for Equipment Purchases Starting 2026
The Small Business Growth Act bumps up the amount businesses can immediately deduct for new equipment and other depreciable assets, rather than spreading the deduction over several years. It effectively doubles the current limits, offering a significant tax break for small to medium-sized businesses looking to invest and grow.
Bigger Breaks for Business Investments
This bill is all about letting businesses write off more of their capital expenses upfront. Specifically, it raises the maximum deduction for qualifying property under Section 179 of the Internal Revenue Code from $1,000,000 to $2,000,000 (SEC. 2). The phase-out threshold also gets a lift, going from $2,500,000 to $3,500,000. What this means is that businesses can invest more before they start losing out on this tax benefit. These changes kick in for property put into service after December 31, 2025.
Real-World Rollout
Imagine a local bakery that wants to upgrade its ovens and mixers. Under current law, they might hesitate if the total cost pushes them over the expensing limit. With this change, they have more breathing room to make those upgrades, deduct the full cost right away, and lower their tax bill in the process. Or consider a contractor needing new machinery – this higher limit could make those big purchases easier to justify financially.
Keeping Up With Inflation
The bill also updates the inflation adjustment to 2026 (SEC. 2). This means the deduction limits will be adjusted annually to reflect the changing value of the dollar, ensuring the tax break doesn't lose its punch over time. This is a practical move that keeps the incentive relevant, no matter what the economy's doing.
Watching the Fine Print
While this sounds like a win for businesses, it's crucial to see how it plays out. It will be important for businesses to keep accurate records, and classify assets correctly. Accountants and tax professionals will likely see an uptick in questions as businesses navigate these changes. But, overall, the Small Business Growth Act looks set to give businesses a real shot in the arm when it comes to investing in their future.