Full Deduction for Manufacturing Real Property Under the New Tax Bill

The “One Big Beautiful Bill” (formally termed “The Act”) introduces a significant tax benefit for manufacturers: a full, immediate deduction for the cost of certain real property used in production activities. Taxpayers can elect to fully expense the cost of qualified production property (QPP) in the year it is placed in service rather than depreciate over 39 years.

Eligibility Criteria

To qualify for the 100% deduction:

  • Be non-residential and depreciable.
  • Be used directly in a qualified production activity.
  • Be located and placed in service in the U.S.
  • Be original-use property (i.e., first use begins with the taxpayer).
  • Have construction begin between January 20, 2025, and December 31, 2028, and be placed in service by December 31, 2030.
  • Purchased property may qualify if it meets the above date window and was not previously used in a qualified production activity.

Key Elements of a Qualified Production Activity

  • Manufacturing – The process of converting raw materials or components into finished goods through manual labor, machinery, or chemical processing. This includes industries such as automotive, electronics, textiles, and equipment fabrication.
  • Production – A broader term that may encompass activities like assembling, packaging, or fabricating tangible goods. It includes operations where raw inputs are systematically transformed into usable or marketable products.
  • Refining – Processes that purify or improve raw materials, such as in oil refining, metal smelting, or chemical processing.

As always, if you have any questions, reach out to your Dent Moses advisor.