Last updated on January 19th, 2026

Among the many wins for U.S. manufacturers as a result of the passage of the One Big Beautiful Bill Act (OBBBA) in July 2025 is the creation of a new temporary deduction for certain property used in production and manufacturing. Section 168(n) of the One Big Beautiful Bill Act introduces a new class of property known as “qualified production property,” for which manufacturers can now claim a full immediate deduction. This article highlights the key components of the qualified production property provision and what it means for domestic manufacturers.

What is considered qualified production property (QPP)?

The One Big Beautiful Bill Act defines qualified production property as the portion of any nonresidential real property which meets the following criteria:

• The property is used by the taxpayer as an integral part of a qualified production activity.
• The property is placed in service in the U.S. or any possession of the U.S.
• The original use of the property commences with the taxpayer.
• The construction of the property begins after January 19, 2025 and before January 1, 2029.
• The property is designated by the taxpayer in the election.
• The property is placed in service before January 1, 2031.

Certain types of property are excluded from the definition of qualified production property, including:

• Leased property
• Any portion of nonresidential real property which is used for offices, administrative services, lodging, parking, sales activities, research activities, software development or engineering activities, or other functions unrelated to the manufacturing, production, or refining of tangible personal property.

What is a qualified production activity?

A “qualified production activity” is defined as the manufacturing, production, or refining of a qualified product resulting in a substantial transformation of the property comprising the product.

Other Things to Note:

• Election required: Businesses are required to make an affirmative election to claim the QPP deduction (unlike bonus depreciation, which is typically applied automatically for qualified property). This election is irrevocable.
• Special rule for acquired QPP: The deduction generally applies to new construction; however, the provision includes a special rule for acquired qualified production property, which provides an exception to the “original use” requirement if certain conditions are met (see Section 168(n) for these conditions).
• Recapture provision: QPP must be used as part of a qualified production activity for at least 10 years after it is placed in service to remain eligible for the deduction. If the property is disposed of or ceases to be used as an integral part of a qualified production activity during this time, any depreciation previously claimed is subject to recapture.

What is the benefit for manufacturers?

Eligible companies can now immediately deduct 100% of the cost of qualified production property, instead of following the typical 39-year depreciation schedule for nonresidential real property. This may significantly increase cash flow for manufacturers constructing or acquiring QPP.

Next Steps

Further guidance from the IRS and the Treasury regarding the qualified production property deduction is forthcoming. In the meantime, we recommend consulting with a tax professional who can help you interpret the QPP tax rule and assess your eligibility for the deduction. RBT CPAs’ manufacturing accounting team is here to support you as you navigate the new rules and tax incentives under the OBBBA. Call RBT today and find out how we can be Remarkably Better Together.