The One Big Beautiful Bill Act, signed into law on July 4, 2025, has brought significant changes to tax policy, especially for manufacturers looking to save on packaging automation equipment. Whether you’re upgrading your equipment or expanding operations, you can save substantial amounts on packaging equipment through tax benefits like bonus depreciation, Section 179 deductions, and more. In this article, we’ll break down how you can leverage these provisions to reduce your capital expenses, improve your cash flow, and make your business more competitive.
What is the Big Beautiful Bill, and How Does It Help Manufacturers?
The Big Beautiful Bill is a comprehensive piece of tax legislation aimed at promoting growth and investment within the manufacturing sector. It includes several key provisions designed to benefit businesses investing in capital assets, like packaging automation equipment. These provisions include:
- 100% Bonus Depreciation Restored
- Section 179 Cap Raised
- Interest Expense Deduction Reverts to EBITDA-based Cap
- Qualified Production Property (QPP)
- R&D Expensing for Automation
These changes directly impact manufacturers by offering new opportunities for tax savings, accelerating deductions, and improving overall financial flexibility. Let’s dive deeper into how these tax incentives work and how they can specifically help you save on packaging automation equipment.
How Can You Save with 100% Bonus Depreciation?
One of the most exciting changes in the Big Beautiful Bill is the restoration of 100% bonus depreciation. This allows businesses to immediately expense the full cost of qualifying equipment placed in service after January 19, 2025. This provision is particularly beneficial for manufacturers like you who are investing in expensive packaging automation equipment.
For example, let’s say you purchase the Lantech S3500 Stretchwrapper for $150,000. Under the Big Beautiful Bill, you can take advantage of 100% bonus depreciation, which would allow you to deduct $36,000 in taxes, assuming you’re in the 24% tax bracket. This means that instead of waiting several years to recover the cost, you can receive significant tax relief in the same year as the purchase.
Example of Bonus Depreciation Tax Savings
- Purchase Price: $150,000
- Bonus Depreciation (24% tax bracket): $36,000
- Post-tax Effective Cost: $114,000
This upfront deduction can provide immediate cash flow relief, making packaging automation investments more affordable. By saving on taxes, your business can reinvest in further expansion or other capital improvements.
Section 179: Maximize Deductions with a Raised Cap
Another significant change in the Big Beautiful Bill is the raised Section 179 cap. Section 179 allows businesses to deduct the full purchase price of qualifying equipment up to a specified limit, rather than depreciating it over several years. Under the new legislation, the deduction cap has been increased to $2.5 million, with a phase-out beginning at $4 million in capital purchases.
This change gives businesses a larger deduction for their capital investments, especially for equipment like packaging automation. You can now write off more of your equipment expenses in a single year, helping reduce taxable income and improve cash flow.
Here’s how Section 179 could work for your packaging automation investment:
- Section 179 Deduction: Up to $2.5 million in qualifying equipment purchases
- Phase-Out: Begins after $4 million in purchases
- Full Deduction in Year 1: This can be applied to your packaging automation equipment, allowing you to fully deduct the cost in the first year.
This is an important tool for manufacturers looking to make large investments in equipment like the Lantech S3500 Stretchwrapper and take advantage of immediate tax savings.
How Does the Interest Expense Deduction Help with Financing?
If you choose to finance packaging automation equipment, the Big Beautiful Bill also restores a more favorable interest expense deduction, based on the EBITDA-based cap. This change means that your ability to deduct interest on financing is no longer limited to earnings before interest and taxes (EBIT), but can be calculated using EBITDA, which excludes depreciation.
This shift provides a more advantageous way for businesses to deduct the cost of financing, making it easier for manufacturers to fund their equipment purchases through loans. If you choose to finance your equipment, this could be a game-changer in reducing your financing costs and increasing the tax savings associated with your interest payments.
For example, if you finance the Lantech S3500 Stretchwrapper at 8% APR, your monthly payment would be approximately $3,042, and you could potentially deduct about $32,500 in interest over the life of the loan, depending on the terms and your business’s tax situation. This could significantly lower the total cost of your equipment.
Qualified Production Property (QPP): Upgrade Your Real Property for Tax Savings
The Big Beautiful Bill also expands the definition of Qualified Production Property (QPP), making real property upgrades tied to your production processes potentially deductible. This means that if you’re making improvements to your facility to accommodate new packaging automation equipment, you may be able to deduct the cost of those upgrades as well.
For example, if you need to upgrade your warehouse or production area to house a new stretch wrapper or other automated equipment, those costs may qualify for tax deductions, further reducing your overall capital investment.
R&D Expensing: Deduct Costs for Automation Development
If you’re developing new processes or technologies related to packaging automation, the Big Beautiful Bill now allows you to fully deduct domestic R&D expenses. This means that costs related to the research and development of packaging automation solutions can be written off immediately, rather than being capitalized over time. If your business is investing in innovative ways to improve packaging efficiency or automating your production line, these deductions can further reduce your tax burden.
A Capital Model Example for Packaging Automation Savings
Let’s walk through a simplified example to show how these provisions work in action. If your business is considering the purchase of a Lantech S3500 Stretchwrapper for $150,000, here’s a breakdown of the potential tax savings under the Big Beautiful Bill:
- Purchase Price: $150,000
- 100% Bonus Depreciation: $36,000
- Section 179 Deduction: Up to $2.5 million for qualifying equipment
- Post-tax Effective Cost: ~$114,000
If you finance the equipment:
- Monthly Payment: ~$3,042
- Deductible Interest: ~$32,500
- Total Financing Savings: Further reduced by the new EBITDA interest cap
The total tax savings can be substantial, allowing you to lower the post-tax cost of the equipment and make it more affordable to finance.
How Can You Benefit from the Big Beautiful Bill?
The Big Beautiful Bill offers several compelling reasons for manufacturers to invest in packaging automation equipment. By taking advantage of provisions like 100% bonus depreciation, Section 179 deductions, and interest expense deductions, you can significantly reduce the upfront costs of your packaging equipment purchases and boost cash flow. Whether you’re purchasing a Lantech S3500 Stretchwrapper or any other automation solution, these tax advantages make it easier for manufacturers to reinvest in their business and stay competitive in today’s market.
Ready to explore your options and see how packaging automation can benefit your business? Contact Us Today to learn more about our packaging solutions.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax laws, including the provisions of the Big Beautiful Bill, are subject to change and may affect businesses differently. Always consult with a qualified accountant, tax advisor, or legal professional to review your specific situation before making decisions related to equipment purchases, deductions, or financing.
