Is Your New Factory Tax-Free? The Truth About the 100% Write-Off Rule
Since the enactment of the "One Big Beautiful Bill Act" (OBBBA) in July 2025, the industrial real estate market has been buzzing. We’ve heard the same question from developers, manufacturers, and investors alike:
"Is it true? Can I really write off my entire building in year one now?"
The answer is a massive YES—but with a very specific catch. It all comes down to what happens inside the building.
If you are looking to maximize your tax strategy this fiscal year, here is the breakdown of who gets the "Golden Ticket" deduction and who is stuck with the old rules.
The "Golden Ticket": Qualified Production Property (QPP)
Under the new legislation, the biggest winner is manufacturing.
The OBBBA introduced a provision for "Qualified Production Property" (QPP). This allows you to deduct 100% of the building shell cost (excluding land) in the very first year. This is a game-changer compared to the traditional 39-year depreciation schedule.
To qualify for the 100% write-off:
The Usage: The building must be an "integral part" of manufacturing, production, or refining.
The Timeline: Construction must have begun after Jan 19, 2025.
The Status: It generally must be new construction (you must be the original user).
The "Mixed-Use" Trap
Be careful. The IRS rarely gives a blanket "yes" without fine print. Even if your building is a factory, the 100% deduction does not apply to square footage used for:
Executive offices
Sales floors or showrooms
Employee break rooms or lodging
The Strategy: You will need a spatial analysis to clearly delineate "production floor" vs. "office space." You can write off the production floor immediately, while the office portion depreciates over the standard 39 years.
What If It’s Just a Warehouse?
If you are building a logistics center, distribution hub, or cold storage facility where no goods are being made, you likely do not qualify for the QPP building shell write-off.
However, there is a silver lining.
The OBBBA reinstated 100% Bonus Depreciation across the board. While you can’t write off the walls and roof of a warehouse in year one, you can use Cost Segregation to aggressively write off everything else.
Eligible for 100% Immediate Deduction:
Interior non-structural components
Specialized electrical/plumbing for machinery
Paving, fencing, and security systems
Flooring and removable partitions
While it’s not the full building, a good Cost Segregation study on a warehouse can still typically accelerate 20%–30% of the building’s total cost into the first year.
The Cheat Sheet: Do You Qualify?
The Bottom Line
The "One Big Beautiful Bill" has created the most significant tax incentive for domestic manufacturing construction we have seen in decades. If you are breaking ground on a production facility, the tax savings alone could effectively subsidize a massive portion of your project.
But if you are in logistics, don't despair—the return of 100% Bonus Depreciation means you still have powerful tools at your disposal; you just need the right study to unlock them.
Disclaimer: Tax laws are subject to change and interpretation. Always consult with your CPA or tax advisor before making major financial decisions based on new legislation.
