Recently, Brown Edwards, Penn Stewart, and First Bank and Trust Company hosted a manufacturing panel discussion bringing together industry leaders and professional advisors to address the most pressing challenges facing manufacturers today. The conversation covered everything from tax incentives and strategic planning to succession planning and emerging technologies.Over this blog series, I'll be sharing key insights from our panelists—Tony Roop (Tax Partner, Brown Edwards), Raleigh Hyder (SVP and Chief Credit Officer, First Bank and Trust Company), and Sean Lundy (Attorney, Officer, Penn Stewart). Their expertise spans tax strategy, commercial lending, and business law, providing manufacturers with practical, actionable advice from multiple perspectives.
Whether you're navigating rising costs, planning for growth, or thinking about the future of your business, these insights from experienced professionals who work with manufacturers every day offer valuable guidance for the road ahead.
PENNSTUART DISCLAIMER: The content and information contained here is not intended as legal advice. Virginia law requires that I (Shaun Lundy) advise you that this website may constitute an advertisement. Content published here is not reviewed or approved by PennStuart before it is posted and does not necessarily represent the views and opinions of PennStuart. I (Shaun Lundy) am expressing personal opinions and not legal opinions and disclaim any and all legal responsibility and liability for any personal comments posted on this site.
Our manufacturing panel discussion opened with a critical question for every business owner weighing equipment purchases: What tax incentives are available right now?
Tony Roop, tax partner with Brown Edwards, broke down the most significant changes affecting manufacturers in 2025. When we talk about investment decisions, we're really talking about two things: buying equipment (or expansion) and paying people. Let me share what manufacturers need to know about both.
Section 179: A Game-Changer for Equipment Purchases
The Section 179 deduction has been a powerful tool for manufacturers, allowing businesses to immediately expense equipment purchases rather than depreciating them over time. But 2025 brings exciting changes.
Historically capped at $1.22 million, the new legislation has more than doubled this limit to $2.5 million for 2025. This means most small and medium-sized manufacturers can now write off their entire equipment investment in the year of purchase.
Whether you're buying a bulldozer or installing new machinery on the factory floor, this expanded deduction offers immediate tax relief. However, limitations apply based on total purchases and income levels, so working with your tax advisor remains essential.
Bonus Depreciation: The Picture Becomes More Complex
Section 179 got better, and there are also significant changes to bonus depreciation. After years of 100% bonus depreciation, we’ve been in a phase-down period for the previous few years.
For 2023, businesses could still take 80% bonus depreciation. In 2024, that dropped to 60%, and for 2025, it's down to 40%. The decline continues at 20% per year until it phases out completely unless Congress acts. Thankfully, the One Big Beautiful Bill (OB3) reversed this phase out and 100% bonus depreciation has been restored for assets acquired and placed in service after January 19, 2025.
The OB3 also creates a new 100% depreciation deduction for “qualified production property”. Qualified production property is nonresidential real property that is used directly in the manufacture, production and refining of a qualified product. This creates enormous opportunities for manufacturers to deduct 100% of the cost of facility construction and expansion that would have previously been expensed over a period of up to 39 years. Unlike Section 179, Bonus depreciation can continue to be utilized regardless of the amount of assets purchased or without income limitations.
The R&D Tax Credit Opportunity
Many manufacturers don't realize they qualify for Research and Development tax credits. These tax credits aren’t just for pharmaceutical companies or tech startups.
If you're developing new products, improving existing processes, or creating innovative solutions in your manufacturing operations, you may be eligible. The key is proper documentation of these activities.
Tony emphasized that many business owners miss this opportunity simply because they don't think their work qualifies as "research and development." The OB3 also made positive changes to the deductibility of R&D expenses that could provide opportunities to deduct previously capitalized costs. Having conversations with your tax advisor about your projects could uncover significant savings.
Energy Credits Tax Credits – Now You See Them, Now You Don’t
Multiple energy tax credits and deductions are expiring by year-end 2025 and into 2026. The Section 179D deduction for energy efficient real property is set to expire on June 30, 2026, so taxpayers should act now to capitalize on this opportunity.
Historically, these credits could combine with other incentives, creating compound benefits for strategic equipment investments.
The Bottom Line
Tax incentives can significantly impact the net cost of equipment investments and hiring decisions, but the rules are complex and constantly evolving. The expanded Section 179 limit, restoration of 100% bonus depreciation, reduction of energy incentives and state and local incentives provide a complex set of planning and coordination opportunities.
My advice? Don't wait until year-end to start planning. Meet with your tax advisor now to model different investment scenarios. Understanding how these incentives work together can help you make smarter decisions about when and what to purchase.
At our panel, the message was clear: manufacturers who stay informed and plan proactively will be best positioned to leverage these opportunities before they change again.
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