March 10, 2026
In Summary
The OBBBA permanently restores the ability for businesses to deduct 100% of the cost of qualified property (such as machinery, equipment, and certain software) in the first year, provided the asset was acquired and placed in service on or after January 19, 2025.
According to IRS Notice 2026-11, both the acquisition date (when a contract becomes binding) and the placed-in-service date (when the asset is ready for use) must fall on or after the January 19, 2025, cutoff to qualify for the full 100% deduction.
For construction or production that began before the cutoff, businesses can use “component elections” to claim 100% depreciation on specific parts installed later, or utilize cost segregation studies to maximize tax savings on building improvements.
The One Big Beautiful Bill Act (OBBBA) restored 100% bonus depreciation on a permanent basis for qualified property acquired after January 19, 2025. That change is especially important for businesses that make capital investments, including equipment purchases, facility improvements, and construction projects. Later, the IRS released Notice 2026-11 to explain how taxpayers can apply the revised rules. For business owners, the guidance clarifies the timing rules, elections, and other details that can affect eligibility and help businesses maximize the benefit of bonus depreciation. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.
Bonus depreciation allows businesses to deduct the cost of qualifying property in the first year rather than spreading out the deduction over time. Before OBBBA, the deduction was scheduled to be phased down to 40% in 2025 and 20% in 2026. It was scheduled to sunset completely for 2027.
OBBBA changed the rules by restoring permanent 100% bonus depreciation for qualified property acquired and placed-in-service on or after January 19, 2025. Qualified property generally includes depreciable property with a recovery period of 20 years or less and includes assets like machinery, equipment, vehicles, and certain computer software. Used property may also qualify if it is new to the taxpayer.
The updated law also added certain sound recording productions. Recordings that begin production after July 4, 2025, may qualify, with the tax benefit realized in the year the recording is released to the public.
Notice 2026-11 largely keeps the same bonus depreciation framework in place, meaning the Section 168(k) rules still apply. However, the key date is now January 19, 2025, and the timing rules work differently depending on the type of property involved.
For purchased property, the main questions are when the business acquired the asset and when it was placed-in-service. The acquisition date usually depends on when the contract became enforceable under state law or when the cancellation period has ended. The placed-in-service date is the date the asset is ready and available for the business to use.
If the asset was acquired in September 2024, for example, and placed-in-service after the January 19, 2025, date, it does not qualify for 100% bonus depreciation. It may qualify for 40% bonus depreciation under the previous law. In other words, the only way to capture the full benefit is for the asset to be both acquired and placed-in-service on or after January 19, 2025.
For self-constructed property, timing depends on a few factors. It is generally treated as acquired when physical work begins or when the taxpayer has incurred more than 10% of the total expected cost. The placed-in-service requirement is separate. That date is generally when the completed asset is ready and available for its intended use in the business.
The component election may matter here. The notice explains that if a construction or renovation project began too early to qualify as a whole, certain components may still qualify for 100% bonus depreciation if they are acquired and placed-in-service on or after January 19, 2025.
A cost segregation study can help uncover any tax saving opportunities in this area. Later purchase and install of interior building components like flooring, plumbing, and lighting is likely to qualify for full bonus depreciation with proper documentation.
The transition year election offers one more option to business owners. For the first taxable year ending after January 19, 2025, taxpayers may elect a 40% first-year depreciation deduction instead of 100%. For certain longer-production-period property and certain aircraft, the election is 60%. This may be advantageous for certain tax planning situations.
Business owners who plan to claim bonus depreciation will want to:
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Notice 2026-11 gives important guidance on claiming bonus depreciation. It’s recommended that business owners consult with tax advisors before filing to review acquisition and placed-in-service dates along with any elections that may be beneficial. 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.