Guidance on OBBB 100% Bonus Depreciation: Key Info for Capital Expenditures in 2026

Ahead of the 2026 tax season, the U.S. Department of the Treasury and the IRS issued Notice 2026-11, confirming that the prior § 168(k) regulatory framework generally continues to apply to the bonus depreciation changes enacted in Public Law 119-21 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (the “OBBB”). Our tax leaders have analyzed the guidance and have outline the most important information below. 

OBBB allows permanent 100% bonus depreciation

Prior to passage of the OBBB, the Tax Cuts and Jobs Act (TCJA) allowed an additional first-year depreciation deduction equal to 100% of the adjusted basis of qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023. Under TCJA, the “applicable percentage” then phased down by 20 percentage points annually for qualified property placed in service after December 31, 2022 (with a one-year delayed phase-down for certain long-production-period property and certain aircraft). For most taxpayers, the phase-down schedule was:

• 80% for property placed in service in 2023
• 60% for property placed in service in 2024
• 40% for property placed in service in 2025
• 20% for property placed in service in 2026
• 0% for property placed in service after December 31, 2026

With the passage of the OBBB (enacted July 4, 2025), 100% additional first-year depreciation was made permanent for qualified property acquired after January 19, 2025. Importantly, while the effective-date rules turn on when property is “acquired” (including the written-binding-contract rules), the deduction is claimed for the tax year the property is placed in service.

Depreciation options for businesses amid new rules

In the recent Notice, the IRS states that taxpayers may generally rely on the existing bonus depreciation regulations while Treasury and the IRS develop updated rules. This flexibility is important because it gives businesses a familiar framework to follow, rather than waiting for final guidance, when evaluating eligibility, documenting acquisition dates and placed-in-service dates, and building depreciation assumptions into budgets, forecasts, and planning discussions.

The interim guidance confirms the continuation of the prior rules related to:

• When self-constructed property is treated as acquired for purposes of the effective-date rules.
• When purchased property is treated as acquired pursuant to a written binding contract.
• The continued availability of the component election, which may allow certain acquired or self-constructed components of larger self-constructed property to be treated as eligible for bonus depreciation, provided the components satisfy the regulatory requirements.
• The ability to elect a reduced percentage, 40% bonus depreciation (60% for certain long-production-period property and certain aircraft) instead of 100%, for qualified property placed in service during the first taxable year ending after January 19, 2025, or to elect out of bonus depreciation entirely for a class of property.

No additional guidance on qualified production property (QPP)

Notice 2026-11 focuses on § 168(k) bonus depreciation (and related elections) and does not provide additional guidance on the separate special allowance for qualified production property.

Plan early, consider all options with your advisor

Bonus depreciation decisions are rarely (if ever) “one-size-fits-all.” The right approach depends on what you’re buying, how it’s financed, when it’s placed in service, and what the rest of your tax picture looks like.

If your organization is planning significant purchases or projects in 2025 or 2026, now is a good time to revisit your depreciation strategy, such as:

• Identifying which assets may qualify under the interim guidance
• Analyzing 100% vs. partial bonus depreciation elections for this filing season
• Reviewing placed-in-service timing and documentation support
• Preparing for the next round of IRS guidance, including qualified production property

If you’re planning major purchases or construction projects, a short planning discussion with UHY can help avoid missed deductions or suboptimal elections later. Reach out here.