Every facility needs an upgrade from time to time, whether it’s adding workspace, reorganizing production areas, or modernizing electrical systems. Under the new One Big Beautiful Bill Act (OBBBA), many of those investments can now pay off faster. With 100% bonus depreciation restored and Section 179 limits expanded for tangible personal property, there’s a practical way to optimize facility space while maximizing tax savings: modular construction.
The Basics: Section 179 and 100% Bonus Depreciation
The OBBBA delivers two major updates that make now an opportune time for strategic investment planning:
- Restored 100% Bonus Depreciation: Under the previous law, bonus depreciation was set to decrease to 40% in 2025. The new legislation removes this phase-down, reinstating a permanent 100% deduction for qualifying tangible personal property placed in service after Jan. 19, 2025.
- Higher Section 179 Expensing Limits: The allowable deduction for immediate expensing has increased to $2.5 million, with the phase-out threshold raised to $4 million, nearly doubling the previous caps. As a result, companies can now fully expense a broader range of eligible purchases under Section 179, up to roughly $6.5 million in qualified investments.
In many cases, Section 179 and 100% bonus depreciation can be used together, creating a powerful incentive to move forward with needed facility improvements.
How Modular Construction Fits the (Big Beautiful) Bill
To capture the full benefit of Section 179 and bonus depreciation, asset classification is key. The tax code distinguishes between real property, which depreciates over 39 years, and tangible personal property (TPP), which typically depreciates over five or seven years—and this is where modular construction provides a clear advantage.
Unlike traditional stick-built additions, modular offices, in-plant buildings, and guard shacks are designed to be moved, reconfigured, and reused. Because they’re not permanently affixed, they often qualify as TPP. Eligible modular assets can then be deducted in full the year they’re placed in service, dramatically improving cash flow compared with the 39-year recovery period for conventional construction.
Modular Wiring and the TPP Advantage
The same principle applies to modular wiring systems. While most fixed electrical wiring is classified as part of the building, the IRS Cost Segregation Audit Technique Guide notes that wiring dedicated to specific equipment or processes may qualify as tangible personal property. Modular wiring takes this a step further with a plug-and-play design that allows circuits to be disconnected, relocated, and reused as facility needs change, giving it the functional traits of movable equipment rather than permanent infrastructure.
For organizations modernizing lighting or production areas, this flexibility can create another avenue for accelerated expensing under the OBBBA’s expanded rules.
Get Strategic: Plan, Document, Verify
Working with a qualified tax professional from the start is the best way to maximize available incentives and avoid costly mistakes. A proactive advisor can help you confirm asset classification, plan project timing, and ensure proper documentation for Section 179 and bonus depreciation claims.
To make the most of these opportunities:
- Start early and stay engaged. Partner with a tax professional throughout the process to confirm asset classification, verify eligibility, and align your project schedule with IRS requirements.
- Mind the calendar. To qualify for immediate expensing, property must be placed in service and deducted within the same tax year. Modular construction’s quick installation makes it easier to plan and meet those deadlines.
- Document carefully. Keep detailed invoices, installation records, and engineering data showing that modular components are freestanding, movable, or removable without structural damage.
- Consider a cost-segregation study. For larger projects, a professional review can identify which portions qualify as tangible personal property and substantiate your deduction.
By planning strategically, documenting thoroughly, and confirming classification from the outset, organizations can confidently claim accelerated deductions with modular facility improvements.
Building on American Soil: Qualified Production Property (QPP)
In an effort to strengthen U.S. manufacturing, the OBBBA introduced a new category called Qualified Production Property (QPP). This provision allows 100% expensing for the construction of facilities used directly in manufacturing and production activities, an incentive designed to make domestic investment more attractive.
Modular construction offers an advantage here as well. As more companies reshore operations and invest in American-made production, its shorter build schedules help meet QPP’s placed-in-service deadlines—projects must start after Jan. 19, 2025, and finish before 2031—enabling manufacturers to expand capacity and claim full first-year deductions.
The Takeaway
By restoring 100% bonus depreciation and expanding Section 179 for tangible personal property, the OBBBA gives businesses greater flexibility to recover costs quickly and reinvest with confidence.
