The One Big Beautiful Bill Act (H.R. 1), signed into law earlier this year, made several updates to the U.S. tax code that are important for water well contractors investing in heavy equipment like drilling rigs that were put into service after January 19, 2025.
The OBBBA restored 100 percent bonus depreciation for qualified new and used equipment and increased the Section 179 expensing limit to $2.5 million, with a phase-out starting at $4 million. These provisions allow drilling companies to deduct the cost of rigs and other heavy equipment in the year the asset goes into service.
For example, a contractor purchasing a $1 million rig in 2025 can deduct the full amount in that tax year, reducing taxable income and avoiding the need to spread deductions across several years. Before OBBBA, bonus depreciation had begun to phase down, dropping to 60 percent in 2024 and was scheduled to fall to 40 percent in 2025.
With these changes, businesses will have more options for managing taxable income and expenses but should consult a tax professional prior to making any decisions on major purchases.
Also related to the groundwater industry, the OBBBA expands federal 529 College Savings Plan to aid workforce development as reported in earlier this summer.
NGWA is hosting a members-only free webinar, Why Equipment Financing Is Essential for Growing Your Business, on October 9. Click here to register.
NGWA Government Affairs Manager Ben Frech will also host a members-only free webinar on the OBBBA and other federal policy changes in 2025 on November 12, focusing on how these updates affect the groundwater industry. Click here to register.