Permanent Bonus Depreciation Under OBBBA: What It Means for Restaurant and Hospitality Businesses

The hospitality industry received a significant tax break on July 4, 2025, when the One, Big, Beautiful, Bill Act (OBBBA) was signed into law. Among its many provisions, one stands out for restaurant and hospitality businesses: the permanent return of 100% bonus depreciation. This change allows businesses to fully expense qualified capital assets such as kitchen equipment, dining furniture, and hotel fixtures in the year they’re placed in service rather than spreading depreciation over several years. For an industry heavily reliant on ongoing investment and capital upgrades, this marks a meaningful improvement in cash flow, planning flexibility, and long-term financial health.

Improved Cash Flow and Liquidity

Immediate expensing enables restaurant and hotel operators to reduce taxable income in the year of investment.  That means faster tax savings, improved liquidity, and more money available for renovations, expansions, or debt reduction.  The changes to the bonus depreciation rules made by the OBBBA apply to assets acquired after January 19, 2025 (and not subject to a binding contract to purchase on or before that date), and, critically, the changes are permanent.

Simplified Capital Planning

Unlike the previous phase-out schedule that created year-end tax-driven spending rushes, permanence gives CFOs and operators breathing room to make smart, operationally timed purchases — not just tax-driven ones.

State Tax Considerations

While 100% bonus depreciation is now permanent at the federal level, many states do not conform to this treatment. States that do not conform to federal treatment require businesses to add back bonus depreciation at the state level and instead apply regular depreciation. This is not a change compared to past rules, but businesses with operations in nonconforming states should plan for these state addbacks to avoid unexpected tax liabilities.

Other Relevant Provisions

The OBBBA includes additional provisions that may contribute to enhancing overall tax efficiency for businesses. The 20% Qualified Business Income (QBI) deduction is now permanent, benefiting many pass-through entities. In addition, the law restores the interest expense limitation under IRC Section 163(j) to an EBITDA-based calculation, allowing greater interest deductibility for companies, though it also requires an addback of certain capitalized interest for purposes of computing the interest that is subject to the Section 163(j) deduction limit. While these changes could be helpful for businesses financing major capital improvements or expansion, the impact of adding back capitalized interest to the calculation of the Section 163(j) deduction limitation needs to be considered in assessing the tax impact of any debt-financed improvement projects.

What This Means for Your Business

For restaurant and hospitality businesses, these changes can have significant benefits, but proper tax forecasting and planning would be beneficial to any investment decision. With bonus depreciation back for good, along with other tax benefits, the OBBBA gives hospitality businesses an opportunity to reinvest boldly, spend smarter, and grow faster.

Citrin Cooperman’s Restaurants and Hospitality Industry Practice is skilled in helping clients assess options to drive growth and achieve their strategic goals. For more information, please contact Kevin Sawler or info@citrincooperman.com.