Key Takeaways
- 100% bonus depreciation is permanently reinstated for qualifying assets placed in service after January 19, 2025, under the One Big Beautiful Bill Act (OBBBA).
- IRS Notice 2026-11 clarifies eligibility, timing and elections for assets including machinery, qualified improvement property and specified sound recordings.
- Taxpayers may opt out or elect reduced bonus depreciation to manage taxable income, interest expense limits or state tax conformity issues.
The U.S. Department of the Treasury and the IRS recently issued Notice 2026-11, interim guidance clarifying changes to the additional first-year depreciation (bonus depreciation) rules enacted under the One Big Beautiful Bill Act (OBBBA). OBBBA permanently restored 100% bonus depreciation, allowing businesses to expense immediately the full cost of qualifying assets placed in service after January 19, 2025. The guidance provides clarity on eligibility, timing and taxpayer elections as the Treasury works toward formal regulations.
Key Provisions
Under prior law, bonus depreciation was subject to a scheduled phase-down, reducing the percentage of first-year expensing available to taxpayers, with an end scheduled for 2027. OBBBA reversed this by permanently reinstating 100% bonus depreciation.
The new guidance confirms that:
- 100% bonus depreciation is permanently available for qualified property acquired and placed in service after January 19, 2025.
- Qualifying property generally includes but is not limited to:
- The asset is treated as acquired when principal recording begins, placed in service upon initial release or broadcast and is eligible for additional first-year depreciation if recording starts in a taxable year ending after July 4, 2025.
- Equipment and machinery with a recovery period of 20 years or less.
- Qualified improvement property.
- Certain self-constructed assets and specified plants.
- Newly eligible sound recording productions, subject to special timing rules.
Elections and Flexibility
Taxpayers retain meaningful planning flexibility, including the ability to:
- Deduct 40% (60% for certain property having longer production periods or certain aircraft) instead of the 100% additional first-year depreciation for the first tax year ending after January 19, 2025.
- Apply bonus depreciation to specified plants (certain agricultural plants).
- Opt out of bonus depreciation for certain classes of property such as furniture, fixtures and equipment (FF&E), land improvements and qualified improvement property.
These elections may be particularly relevant for businesses managing taxable income levels, interest expense limitations, net operating losses or state tax conformity considerations.
What’s Next?
Businesses should review recent and planned capital expenditures to assess eligibility and determine whether full expensing or alternative elections provide the most favorable outcome. Additional IRS guidance and proposed regulations are expected. Notably, the IRS has not yet issued guidance on the newly created 168(n) for immediate deductibility of costs related to certain new factory or production facilities.
Read the full IRS notice here.
Contact Us
If you have questions about how these changes may affect your business or would like assistance evaluating depreciation planning opportunities, please contact your PKF O’Connor Davies client service team or:
Joe Petosa, MBA
Director
jpetosa@pkfod.com
Darren Bushey, CPA
Partner
dbushey@pkfod.com