The One Big Beautiful Bill (OBBB), recently passed by the U.S. House, reinstates 100% bonus depreciation for qualifying property improvements. The legislation reintroduces a valuable tool for business owners and finance leaders aiming to reduce taxable income, improve after-tax cash flow, and accelerate returns on capital investments.
The legislation applies to qualifying assets placed in service after January 20, 2025. It is expected to remain in place through at least 2029. This timeline gives operators a clear window for planning large capital projects and aligning them with broader financing strategies.
One strategy in particular stands out: combining 100% bonus depreciation with a sale leaseback. When paired effectively, these two tools allow companies to access trapped real estate equity, reinvest in their locations, and capture immediate tax savings without adding debt or giving up operational control.
Bonus depreciation allows businesses to deduct the full cost of certain qualifying property improvements in the same year the assets are placed into service. At 100%, the entire investment is written off in Year 1, rather than being depreciated over a 15- to 39-year schedule. This approach significantly lowers taxable income in the year of investment and accelerates the financial benefits of capital reinvestment.
The types of improvements that qualify for this treatment include assets that are commonly upgraded during renovations or expansions. These improvements include HVAC systems, lighting and signage, parking lot resurfacing, sidewalk repairs, store fixtures, and interior renovations that fall under the Qualified Improvement Property (QIP) classification. Businesses that upgrade their facilities for operational or brand reasons can now gain a meaningful tax benefit in the same year they complete the project.
A sale leaseback is a real estate transaction in which a business sells its owned property to an investor and leases it back through a long-term lease. This structure allows the operator to remain in place and continue running the business without interruption. The capital unlocked through the sale becomes available for reinvestment, expansion, or strategic use.
When the proceeds of a sale leaseback are allocated to qualifying property improvements, those funds can be immediately deducted through bonus depreciation. The result is a twofold benefit: access to liquidity and a large, front-loaded tax shield. This approach gives businesses the flexibility to reinvest without borrowing and provides an immediate return through tax savings.
To illustrate how this works in practice, consider a multi-location auto service company based in Texas. The business owns one of its high-traffic locations outright. It sells the building to a real estate investor for $10 million and enters into a 20-year lease to continue operating at the same site. From the sale proceeds, the business invests $2.5 million into improvements, including upgraded HVAC systems, new lifts and repair equipment, customer lounge renovations, and parking lot resurfacing.
The company operates as a C-corporation and reports $4.5 million in annual EBITDA. Under the previous tax treatment, the $2.5 million in improvements would have been depreciated over 15 years. That would have resulted in approximately $166,667 in depreciation per year, producing about $35,000 in annual tax savings at the 21% federal tax rate.
With 100% bonus depreciation now available, the company deducts the entire $2.5 million in Year 1. This produces $525,000 in immediate federal tax savings. Because the business is based in Texas, which does not impose a corporate income tax, the full benefit applies at the federal level.
This strategy improves the company’s first-year after-tax cash flow by approximately $490,000 compared to the old schedule. At the same time, the company retains full use of the facility and improves the customer experience with updated infrastructure.
The power of this structure lies in how the components work together. The sale leaseback provides capital. That capital funds improvements that meet the criteria for bonus depreciation. The tax deduction reduces the company’s federal tax liability in the same fiscal year. This combination improves liquidity, reduces tax burden, and supports operational upgrades.
Each decision reinforces the next. Selling the real estate improves the balance sheet. Reinvesting in the location extends the asset’s life and enhances brand value. Capturing the tax benefit strengthens cash flow and accelerates payback on the reinvestment. This creates a clear, measurable return on strategy without adding complexity to the business.
Companies that want to explore this structure should start by identifying the locations they own and estimating the cost of necessary improvements. Locations that are outdated, underinvested, or preparing for a rebrand often present the most upside.
It is important to collaborate with tax professionals to confirm that planned improvements meet the federal guidelines for bonus depreciation eligibility. Not all property upgrades qualify. An experienced advisor will help classify assets properly and ensure the timing aligns with IRS requirements. Working with a real estate advisory firm can also ensure that lease terms and sale pricing are aligned with long-term operational needs.
A recent financial modeling exercise conducted with Horizon Tax Advantage demonstrates how this strategy plays out in practice. Combining real estate, tax, and capital planning creates better outcomes for both operators and their financial sponsors.
This strategy applies to a wide range of industries that rely on physical locations for service delivery or customer engagement. Auto service businesses, car wash operators, grocery stores, medical clinics, and franchise-based businesses all stand to benefit. These businesses often own valuable real estate and have ongoing improvement needs.
Companies preparing for expansion, private equity transactions, or recapitalizations can also benefit from this approach. The improved cash flow and cleaner balance sheet can enhance valuation and create more flexibility when negotiating with lenders or investors.
The reinstatement of 100% bonus depreciation provides a clear opportunity for companies to integrate tax strategy with capital planning. For businesses that own their facilities, combining this provision with a sale leaseback offers a disciplined approach to improving liquidity, reducing tax liability, and supporting reinvestment—without adding leverage or disrupting operations. As 2025 approaches, aligning these strategies may be one of the most practical moves business owners can make.