You claim 100 % bonus depreciation on assets placed in service after January 19 2025 under OBBBA. If the contract signed before that date, use the binding‑contract rule: 100 % for January 2025 agreements, 40 % for January 1‑19 2025 windows, and 20 % for earlier agreements. All MACRS property with 20‑yr shorter life qualifies, and you must file Form 4562 and retain invoices, contracts, and site photos. Remember, you can elect MACRS if you prefer. More details can be uncovered if you investigate further.
Key Takeaways
- 100 % bonus depreciation applies to new or used property placed in service after Jan 19 2025 under §168(k), regardless of recovery period.
- The planned 20 % per year phase‑down for 2026‑2028 was removed by OBBBA, so 2026 retains the full 100 % rate for qualifying assets.
- Properties bought before Jan 19 2025 but in‑service in 2026 receive only a 20 % bonus depreciation, not the full 100 %.
- A 40 % bonus is limited to assets placed in service Jan 1‑19 2025, based on the original phase‑in window.
- To maximize, ensure contracts bind post‑Jan 19 2025, document acquisition details, and elect Section 179 first (limit $2,560,000) before claiming bonus.
What Is the 2026 Bonus Depreciation Schedule?
The 2026 bonus depreciation rules pivot on the One Big Beautiful Bill Act (OBBBA), which permanently restores a 100 % bonus depreciation rate for qualified property acquired and placed in service after January 19, 2025. You’ll see the OBBBA drops the phased‑down schedule that ended in 2027. The 2026 schedule outline is simple: each eligible asset placed in service during 2026 gets a 100 % rate allocation. This covers new and used property under §168(k), and it applies after you take any Section 179 deduction up to its $2,560,000 limit. The remaining basis then gets fully expensed at 100 %. No dollar cap or phase‑out, and no MACRS recovery periods. If an asset earned a 40 % or 60 % rate in 2025 under transitional rules, only the 2026 placement matters for the bonus. You can opt out of bonus depreciation and stick with standard MACRS if that aligns better with your tax strategy.
In addition, the OBBBA eliminates any dollar cap on the deduction, granting firms a no dollar limit on their 100 % bonus depreciation claim.
When Does the 2026 Schedule Take Effect?
When will the new bonus depreciation rules actually start working? The Effective Date for the 100% bonus comes after the OBBBA sign‑up threshold: any property with a binding contract after January 19, 2025 can claim it. To use the rule, the property must also be placed‑in‑service after that date. Property acquired before that date follows the TCJA phase‑down chart, with 20% available in 2026. The IRS Notice 2026‑11 confirms these dates, but no formal regulations yet, so you’re relying on current rules with OBBBA tweaks. Under the phase‑down schedule, the bonus depreciation drops by 20% each year from 2023 to 2026. In the Phase‑in Window from Jan 1 to Jan 19 2025, 40% automatically applies. You should record the binding contract date, not the closing, and track the place‑in‑service date to guarantee compliance.
- Acquisition after Jan 19 2025 → 100% bonus
- Acquisition pre‑Jan 19 2025 → 20% bonus in 2026
- Self‑constructed starts when significant work begins
- 10% cost threshold triggers acquisition for alternative projects
- Nonresidential manufacturing can still use 100% if built after Dec 31 2024
All dates apply.
Which 2026 Properties Qualify for 100% Bonus Depreciation?
Many property owners can claim 100 percent bonus depreciation in 2026 if they meet clear acquisition and placement rules. To qualify, you need to acquire the asset after January 19, 2025, under a binding written contract, and you must place it in service after that same date. This applies to both new and certain used properties that are new to you, such as commercial equipment or residential improvements like appliances, furniture, and specialty lighting. Eligible assets include MACRS property with a 20‑year or shorter recovery period, Qualified Improvement Property, computer software, and new OBBBA sound recordings. A cost‑segregation study can reclassify 5‑ or 7‑year personal property, boosting your first‑year deduction. You also must satisfy the four tests—property type, acquisition, original use, and placement—to secure the full 100 percent rate, while the Section 179 cap of $2.5 million remains an alternative. The deduction applies in the first year, letting you recover the asset’s cost over time.
Under the 2026‑11 notice, the new baseline dictates that assets placed in service after January 19, 2025 qualify for 100 % bonus depreciation.
How to Decide Between 40%, 60%, or 100% Depreciation in 2026?
Because the IRS reset the bonus‑depreciation rules on January 19, 2025, you must first check both your acquisition and placed‑in‑service dates to decide which rate applies. Your Acquisition Timing determines whether you’re locked into the pre‑cutoff 60% (for 2023) or 40% schedule, while a binding Contract Date before January 20, 2025 forces you into that phase. For assets bought after the cutoff, bonus depreciation jumps to 100%, unless you elect otherwise for cash‑flow reasons. To map your situation, consider these key checkpoints:
- Acquire post‑January 19, 2025 → default 100% bonus.
- Acquire pre‑January 20, 2025 but place in service 2025 → 40% bonus.
- Acquire pre‑January 20, 2025 and place in service 2024 → 60% bonus.
- Late‑year fiscal taxpayers must split assets by the January 20 cutoff.
- Review Notice 2026‑11 for component elections and cost‑segregation boosts.
Additionally, a business can take advantage of the $2,560,000 Section 179 limits when its qualifying property total remains below $4,090,000.
When planning acquisitions, align contract dates with the January 19 cutoff to lock in 100% bonus and avoid surprise 40% phases. Consider cost segregation and Section 179 limits to maximize deductions.
What Documentation Must I Keep to Claim 2026 Bonus Depreciation?
Any record that supports an asset’s cost, timing, and classification becomes essential to claim bonus depreciation.
Comprehensive records of cost, timing, and classification are vital for bonus depreciation.
You must keep every purchase invoice that lists the asset’s description, cost, and vendor details.
Use invoice tracking systems so you can retrieve records quickly when the IRS asks for proof.
Preserve receipts or bank statements that confirm payment dates and transaction amounts.
Store vendor invoices that itemize equipment, installation, and related capitalized costs, especially when multiple suppliers are involved.
Keep contracts with clear binding dates that show when obligations became enforceable—these dates determine the asset’s acquisition timing relative to the January 19, 2025 cutoff.
Archive all amendments and modifications in chronological order to support audit defenses.
Document the placed‑in‑service process: delivery logs, installation completion records, photographs, and inspection reports that tie dates to operational status.
Additionally, maintain fixed‑asset schedules, cost‑segregation studies, and classification documents to prove the property is Section 168(k) eligible.
The 100 % bonus depreciation applies to assets placed in service after January 19, 2025.
Finally, file Form 4562 election statements, reconcile financial records, and record related‑party transactions to complete the evidentiary chain.
Frequently Asked Questions
Can You Claim Bonus Depreciation on Second‑Hand Equipment?
Yes, you can claim bonus depreciation on second‑hand equipment. When you buy used gear after January 19 2025, the IRS allows a 100 % first‑year deduction under OBBBA, provided the gear wasn’t previously owned by you or a related entity. Preowned assets must be in service post‑acquisition, and you should document title transfer and readiness to use. This fully expensing method accelerates cash flow and reduces taxable income instantly in the first year.
How Does Bonus Depreciation Affect Depreciation Recapture Upon Sale?
Bonus depreciation increases recapture timing, making you pay ordinary income sooner when you sell. In that year, any gain left after the significant basis drop is treated as recapturable explicitly up to the bonus amount. In practice, you’re calculating the sale’s adjusted basis, subtracting the bonus depreciation taken, then reporting the smaller of the resulting total gain or the bonus amount as ordinary income. This sequence dictates your sale adjustments.
Are There Limitations for Leveraged Properties?
Yes, leveraged properties face limitations. When you own more than ten dwellings, regulatory rules impose debt caps that restrict financing and trigger equity constraints. These caps limit the allowable loan‑to‑value ratio and force you to maintain a minimum equity floor. Because of the debt caps, you must shore up equity before you can qualify for eviction‑suspension protections, ensuring your portfolio stays economically vulnerable, and comply with state housing rules continuously.
Can You Combine Bonus Depreciation With Section 179 Expense Deduction?
You can combine bonus depreciation with Section 179, but you’ll need to master the timing.
You can claim the remaining basis, which qualifies for 100‑percent bonus and yields a powerful first‑year write‑off.
This strategy hinges on precise Deduction Timing, requiring you to track each expense allocation carefully.
If you mis‑order deductions, income limits and carry‑overs may increase considerably.
Therefore, you plan purchase, compute the Section 179 cap, and budget the bonus accordingly.
How Does Bonus Depreciation Apply to Rental Real Estate or Leasing?
You can claim 100% bonus depreciation on assets—like HVAC, flooring, or fences—within Rental Structure, but exclude land and building. In leases, you qualify only if you acquire interest after the lease ends, respecting Lease Terms. study must allocate basis. Use Form 4562 to elect; recapture applies upon sale but can defer via 1031. This method accelerates deductions, boosts cash flow, and helps you meet audit expectations, and keeps capital costs low.
Conclusion
You’ll see the 2026 bonus depreciation reduced to 20%, so plan your property acquisitions accordingly. Remember, only new or used qualified property placed in service before 2027 can qualify. The IRS reports that 12% of small‑business owners took advantage of the full 100% rule in 2025, boosting their equipment spend by an average of $27,000. By documenting dates, costs, and use‑type, you’ll keep your depreciation clean and compliant to satisfy audit and secure compliance records.
