100% Bonus Depreciation After OBBBA: What Applies to 2026 Purchases

Bonus depreciation under IRC §168(k) changed materially after the One Big Beautiful Bill Act. Under current federal law, qualifying property generally receives 100% bonus depreciation when it is acquired after January 19, 2025 and placed in service after that date, unless a transition rule, acquisition restriction, election out, or special asset rule applies.

The rule is not based only on the year the property is purchased. Both the acquisition rules and the placed-in-service date matter.

Acquisition Date and Placed-in-Service Date

Property is placed in service when it is ready and available for its intended business use. Ordering, paying for, or physically receiving an asset does not necessarily establish that date.

A machine delivered in December but not installed and operational until January may be placed in service in January. Conversely, equipment that is fully installed and available for use before year-end may be placed in service even if production has not yet begun.

The acquisition date matters because property acquired under a binding contract entered into on or before January 19, 2025 may remain subject to earlier rules. Transactions involving prior contracts, related parties, self-constructed property, or long-production-period property require closer review.

Property That May Qualify

Qualifying property generally includes depreciable tangible property with a recovery period of 20 years or less, certain computer software, qualified improvement property, and certain other statutory categories.

New property and certain used property may qualify. Used property is subject to additional restrictions, including rules involving prior use by the taxpayer and acquisitions from related parties.

Land does not qualify, and a building's structural components generally do not qualify unless a separate provision applies. Passenger automobiles remain subject to the annual depreciation limits, so 100% bonus depreciation does not automatically allow the full purchase price of a car to be deducted in one year.

Bonus Depreciation Is Generally Automatic

Bonus depreciation generally applies automatically to an eligible class of property unless the taxpayer makes a timely election out. The election is generally made by class of property, not asset by asset.

That is different from Section 179, which is elective and can be applied more selectively. Section 179 is also limited by taxable income from active trades or businesses, while bonus depreciation can create or increase a net operating loss. Whether that produces an immediate tax benefit depends on the taxpayer's ability to use the loss.

Section 179 and Bonus Depreciation Should Be Coordinated

A business may use Section 179 first for selected assets and then apply bonus depreciation to remaining eligible basis. The order and elections can affect state-tax conformity, taxable income, basis, future depreciation, and the amount of any net operating loss.

The largest first-year deduction is not automatically the best result. A business may prefer to preserve deductions for later years, avoid creating an unusable loss, or elect out for a class of property.

The 2026 Takeaway

For most qualifying property acquired after January 19, 2025 and placed in service during 2026, the federal bonus depreciation percentage is 100%.

Before relying on the deduction, confirm the legal acquisition date, any prior binding contract, when the property became ready and available for business use, the property's eligible class, used-property and related-party restrictions, passenger-vehicle or listed-property limits, and whether electing out would produce a better overall result.

Tax treatment depends on the taxpayer's facts and current federal law. This information is educational and is not a substitute for advice about a specific purchase or depreciation election.

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