The $2.5M cap, the $4M phase-out, and what the One Big Beautiful Bill Act actually changed for commercial building owners.
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For property placed in service in tax years beginning after December 31, 2024, the Section 179 maximum deduction is $2.5 million, with a phase-out beginning at $4 million in qualifying purchases and full phase-out at $6.5 million. These figures are per taxpayer per year, not per building, and are indexed for inflation.
The One Big Beautiful Bill Act (OBBBA), Public Law 119-21, was signed into law on July 4, 2025. It made the Section 179 expensing regime permanent and roughly doubled the deduction limits that were in place under the Tax Cuts and Jobs Act.
Under the prior law, the 2025 pre-OBBBA limits were $1.25M with a $3.13M phase-out threshold. The OBBBA changed those to $2.5M and $4M respectively, effective for property placed in service in tax years beginning after December 31, 2024.
| Provision | Pre-OBBBA (2025) | OBBBA (2026+) |
|---|---|---|
| Maximum annual deduction | $1.25M | $2.5M |
| Phase-out threshold | $3.13M | $4.0M |
| Fully phased out at | $4.38M | $6.5M |
| Inflation indexed | Yes | Yes |
Above the $4M phase-out threshold, the Section 179 deduction reduces dollar-for-dollar as total qualifying purchases increase. Once you cross $6.5M in total qualifying property placed in service in the year, the deduction is completely eliminated.
Example math (illustrative, not tax advice):
Above the phase-out, coordination with bonus depreciation on other qualifying assets is often the next lever a CPA looks at. A commercial roof itself is not bonus-depreciation-eligible, but other project components might be.
Even if your project is well under the $2.5M cap, Section 179 still cannot exceed your aggregate business taxable income for the year, and it cannot create a net operating loss. This is the ceiling that catches owners off guard.
Practical effect: a $500K roof replacement on a building generating $200K of qualifying business income can only produce a $200K Section 179 deduction that year. The remaining $300K carries forward — with no expiration — until you have enough income to absorb it.
For pass-through entities (S corporations, partnerships, LLCs taxed as such), the income limit applies at both the entity level and the owner level. Structure matters, and it’s a conversation with your CPA before you elect — not after.
Some marketing materials claim the $2.5M cap applies per commercial building. It does not. The Section 179 limit is per taxpayer, per tax year, aggregated across all Section 179 property — equipment, machinery, qualifying real property improvements, everything. If you replace roofs on three buildings in the same year and other qualifying property, they all count against the same $2.5M ceiling.
This matters most for owners of multiple properties and for portfolios where phasing projects across tax years can preserve more of the deduction.
Both the $2.5M cap and the $4M phase-out threshold are indexed for inflation on an annual basis under the OBBBA. This means the 2027, 2028, and future-year limits will be slightly higher than the 2026 base. When planning a multi-year renovation program, use the current year’s limits confirmed by your CPA, not the base OBBBA numbers.
The full guide for commercial building owners.
The five eligibility conditions the IRS applies.
A walkthrough of how the deduction could apply.
We’ll scope the project, document it correctly for Section 179 consideration, and coordinate with your CPA.
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