February 11, 2026

IRS Issues Interim Guidance on 100% Bonus Depreciation

In Summary

• The OBBBA reinstates the full 100% bonus depreciation for qualifying assets (such as equipment, software, and “qualified sound recordings”) acquired and placed in service on or after January 19, 2025, effectively removing the previous phase-down schedule.

• Businesses can utilize new strategic elections, including a transition-year option to use a lower 40% rate if it suits their tax planning, and a component election that allows for deducting specific parts of a large project as they become operational rather than waiting for the entire project’s completion.

The IRS has released Notice 2026-11, clarifying how 100% bonus depreciation works under the One Big Beautiful Bill Act (OBBBA). The interim guidance outlines the timing rules, available elections, and the types of property that qualify now that the full deduction is back in place. These issues are particularly important for any business investing in equipment, upgrading facilities, or managing multi-year projects. This guidance will ensure businesses can take full advantage of this compelling tax savings tool. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.

What OBBBA Changed

OBBBA restored 100% bonus depreciation and removed the phase-down schedule that would have reduced the benefit each year and phased it out entirely by 2027. With the full deduction back in place, businesses can once again plan ahead and expense qualifying property in the year it’s placed in service. 

To use the 100% rate under OBBBA, property must be acquired and placed in service after January 19, 2025. Anything tied to an earlier contract or placed in service before that date falls under the previous rates. 

Notice 2026-11 updates the existing regulations to match these changes. It keeps the basic framework but explains how the timing rules and elections work now that the full deduction has been reinstated.

Key Takeaways from Notice 2026-11

Timing — For most property, the reinstated 100% bonus depreciation applies only if the asset is both acquired and placed in service on or after January 19, 2025. Property is acquired when a contract becomes enforceable under state law. Property is placed in service when it is ready and available for use. 

For example, if a company entered into a binding contract in November 2024 and placed the equipment in service in mid-February 2025, it may fall under the pre-OBBBA phase-down rules. Businesses will want to keep all documentation for several years in any case. 

Transition-Year Option — Notice 2026-11 allows taxpayers to choose a reduced bonus rate instead of the full 100%. In other words, for the first taxable year ending after January 19, 2025, a taxpayer may elect to apply the previous 40% bonus rate for eligible property.

Some businesses may prefer this option if a full deduction would be unfavorable to the overall tax planning picture. This election cannot be changed once filed.

Component Election — The component election lets businesses claim bonus depreciation on parts of a project as soon as those parts are ready to use. The entire project does not need to be finished.

This can help when a project comes online in stages. For example, an electrical system or HVAC unit may be operational months before the full renovation is complete. To use this election, taxpayers need clear records showing when each component was ready and available for use.

Qualifying Property — Most qualified property categories are unchanged. Eligible assets include property with a recovery period of 20 years or less, qualified improvement property, computer software, and specified plants.

OBBBA also created a new category: qualified sound recording productions. These projects follow a separate timeline. To qualify, recording must begin in a taxable year ending after July 4, 2025. The deduction is taken in the year the finished content is released or otherwise made available to the public, which is when the production is considered placed in service.

For example, a calendar-year taxpayer that starts recording a podcast after the July cutoff and releases it the next year would claim the deduction in the year of release. Projects that begin recording before the cutoff do not qualify. Taxpayers may also elect out of bonus depreciation for this category if they prefer to recover costs over time.

Planning Opportunities

• Check timelines against January 19, 2025. For every major purchase or project, confirm when the contract became binding and when the asset was placed in service.
• Look for component-level opportunities on larger projects. If certain systems or components are operational before the full project is done, the component election may accelerate cash flow.
• Model the election strategy. Many businesses will want the full 100% deduction. Others may find the 40% transition-year election produces a better overall outcome.
• Use cost segregation for real estate. A cost segregation study can identify shorter-life assets inside a building or renovation that qualify for bonus depreciation, allowing owners to accelerate part of the investment into the current year.

Contact Us

The interim guidance helps business owners understand and apply bonus depreciation under OBBBA. Businesses can benefit from working with advisors to determine correct acquisition and placed in service dates and to see if there are any other opportunities available under the updated rules. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.