By Mike Walsh

Industrial manufacturers often view depreciation as an accounting exercise addressed after construction is complete. In reality, many of the most influential factors that shape depreciation outcomes are established much earlier—during project planning, design, and execution. This distinction has become even more important following the passage of 2025’s “Big Beautiful Bill,” which includes changes to depreciation and expensing rules that affect facility renovations, expansions, and new plant construction.

One of the most important takeaways for owners, the design team, and construction team alike is that the timing, classification, and planning of capital investments can meaningfully influence capital and cash-flow outcomes. Decisions made early—often before design is finalized or construction begins—may affect whether certain assets are expensed immediately, depreciated more quickly, or written off over longer timeframes.

Facilities-focused view of the legislation

From a facilities and project-delivery perspective, the 2025 legislation introduces several considerations that industrial teams should be aware of:

  • It extends or restores favorable depreciation treatment for certain capital assets
  • It expands depreciation considerations tied to manufacturing and production activities
  • It reinforces the importance of placed-in-service timing
  • It interacts with renovation, improvement, and energy-related investment decisions

While depreciation is ultimately an accounting outcome, many of the inputs that influence it are shaped by facility planning, system definition, construction phasing, and commissioning strategy.

Why timing consistently drives outcomes

Across nearly all depreciation strategies, timing matters. Placed-in-service dates, construction sequencing, and startup approaches can materially influence when depreciation benefits begin.

For large industrial projects, partial or phased startup may allow portions of a facility—or specific system —to be placed in service earlier, enabling benefits to start sooner. In contrast, projects that defer planning until late in the process often see more assets default to longer depreciation schedules. In compressed or reactive scenarios, some opportunities may be reduced or lost entirely.

Simultaneous evaluation key to complex planning

Energy and sustainability investments add another layer of complexity for manufacturers simultaneously pursuing energy-efficiency upgrades, electrification, and ESG-driven initiatives. Under current rules, energy incentives and depreciation can either work together or work against each other—and the outcome often depends on how the project is planned and documented.

The most effective outcomes tend to occur when owners, tax advisors, and project teams evaluate energy investments, depreciation considerations, and capital planning early and simultaneously. This approach supports informed decision-making, reduces downstream surprises, and helps align facility investments with operational, financial, and long-term business objectives.

To explore these concepts in greater detail, download IMEG’s free guide:
Strategic Depreciation Planning for Industrial Manufacturers.