100% Bonus Depreciation 2026: Now Permanent
100% bonus depreciation is permanent for property acquired after January 19, 2025. The 2026 rules, the binding-contract trap, and where Section 179 fits.
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Quick Answer: Is Bonus Depreciation Still 100% in 2026?
Yes. The One Big Beautiful Bill Act (P.L. 119-21, Section 70301) made the Section 168(k) first-year bonus depreciation deduction a permanent 100% for qualified property acquired and placed in service after January 19, 2025. The annual phase-down is gone. So is the dollar cap, and the statute no longer carries a sunset date.
One caveat decides whether you get 100% or something much smaller: the statute turns on when you acquired the property, not when it showed up on your loading dock. A machine you ordered under a binding contract in late 2024 and received in 2026 is not on the permanent schedule. It is on the old one, at 20%.
Key Takeaways
- 100% is permanent for qualified property acquired and placed in service after January 19, 2025. The January 1, 2027 placed-in-service deadline is gone.
- Acquisition date, not delivery date, controls. A written binding contract signed on or before January 19, 2025 locks the asset onto the old TCJA percentages.
- The old schedule for a 2026 placed-in-service year is 20%, not the 40% that most articles still quote. 40% was the 2025 rate. In 2027 the old schedule pays nothing.
- Used property qualifies if it is new to you and not bought from a related party.
- Section 179 for 2026 is capped at $2,560,000, phasing out above $4,090,000 of qualifying property placed in service, with a $32,000 sub-limit for heavy SUVs.
- Bonus has no cap and no income limit, so it can create a net operating loss. Section 179 cannot.
- Passenger cars are still capped. First-year depreciation with bonus applied is limited to $20,300 for a car placed in service in 2026.
- Two new categories arrived with the Act: qualified sound recording productions and the Section 168(n) election for production facilities.
What Changed: From a Phase-Down to a Permanent 100%
Under the Tax Cuts and Jobs Act, 100% bonus depreciation was always temporary. It stepped down on a fixed ladder: 100% through 2022, then 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and nothing after 2026.
The One Big Beautiful Bill Act removed three things at once: the annual step-down itself, the requirement that property be placed in service before January 1, 2027, and the special longer deadlines for long-production-period property and certain aircraft. What remains is a flat 100% with no expiration written into the statute.
IRS Notice 2026-11 confirmed how the agency will administer this. Rather than write a new rulebook, the IRS is recycling the existing TCJA regulations under Reg. Section 1.168(k)-2 and substituting “100 percent” for the applicable percentage, with January 19, 2025 replacing September 27, 2017 as the pivot date. Every familiar mechanism carries over intact: the 10% safe harbor, the self-constructed property test, and the component election.
The Act also quietly expanded the eligible property list. Qualified sound recording productions under Section 181(f) can now claim bonus depreciation for productions commencing in tax years ending after July 4, 2025. Almost nothing written about the new rules mentions it.
One honest note about the word “permanent.” It means there is no sunset date in the current statute, not that the rule is beyond reach. The TCJA’s 100% was also sold as settled law in 2017, and it had faded to 40% by 2025. Plan around the rule as written, but do not build a ten-year model on it.
The January 19, 2025 Acquisition-Date Trap
This is where real money gets lost, and it is the part most write-ups skip.
Acquisition is not delivery. For property you buy under a contract, Reg. Section 1.168(k)-2(b)(5)(ii)(B) sets the acquisition date as the later of four events:
- The date the contract was entered into
- The date the contract became enforceable under state law
- The date all cancellation periods ended
- The date all contingencies were satisfied
A “written binding contract” has a specific meaning here. It is a contract enforceable under state law against you that does not limit damages to a specified amount. The regulation sets that bar low. A damages cap worth at least 5% of the total contract price does not count as limiting damages, so an ordinary liquidated-damages clause usually leaves the contract binding.
What is not binding: an option to buy, a letter of intent, a supply agreement that has not yet fixed quantity and design specifications, or a contract promising a full refund of the price in lieu of damages. A cancellation period is a different animal. It does not break binding status on its own; it pushes the acquisition date out to the day the last cancellation period ends.
Which makes this an odd corner of the code, because the weaker agreement is the better outcome. A non-binding order does not pin your acquisition date to 2024 by its signature date alone.
Two dates, two different answers
Scenario A. You signed a binding purchase order for a CNC machine on December 12, 2024. The machine shipped and went into production in February 2026. Acquisition date: December 2024. That asset sits on the old TCJA ladder, so your 2026 placed-in-service year gets 20% bonus, not 100%. Had it slipped to 2027, it would have gotten nothing.
Scenario B. Same machine, same February 2026 delivery, but the purchase order was signed February 3, 2025. Acquisition date: after January 19, 2025. You deduct 100% of the cost in 2026.
Identical equipment, identical delivery, a difference of a few weeks on a signature line, and a first-year deduction gap of 80% of the purchase price.
Self-constructed property and the 10% safe harbor
If you build the asset yourself, the acquisition date is when physical work of a significant nature begins. The safe harbor treats that as the point when you have paid or incurred more than 10% of the total cost, excluding the cost of land and preliminary activities such as planning, design, financing, exploring, and researching.
For a non-binding contract, the acquisition date is the date you paid or incurred more than 10% of the total cost, with the same carve-outs for land and preliminary activities. For anyone who started spending in early 2025, both rules are a practical escape hatch.
The transition election is a 2025 item
Section 168(k)(10) let taxpayers elect 40% instead of 100% (60% for certain long-production-period property and aircraft), but only for the first taxable year ending after January 19, 2025. For calendar-year filers that was the 2025 return. If you are working on a 2026 return, that election is behind you. Stop looking for it.
What Property Qualifies (and What Doesn’t)
The core test is unchanged: MACRS property with a recovery period of 20 years or less.
Qualifies:
- Machinery, equipment, tools, and fixtures
- Office furniture and computers
- Qualified improvement property (15-year interior improvements to nonresidential buildings)
- Land improvements such as fencing, paving, and site lighting (15-year)
- Certain computer software depreciated under Section 167(f)(1)
- Qualified film, television, and live theatrical productions
- Qualified sound recording productions (new under the Act)
Used property counts. As long as the asset is new to you, was not acquired from a related party, and clears the acquisition-date rules, a secondhand excavator gets the same treatment as a new one.
Does not qualify:
- Land, which is never depreciable
- The residential rental building shell (27.5-year property)
- The nonresidential building shell (39-year property), apart from the separate Section 168(n) election below
- Property required to use the alternative depreciation system
That building-shell exclusion is why cost segregation studies exist. A study carves out the 5-, 7-, and 15-year components buried inside a property (appliances, carpet, cabinetry, specialty electrical, landscaping) so those pieces can take bonus while the shell keeps depreciating over 27.5 or 39 years. The passive activity loss rules under Section 469 still decide whether the resulting loss does anything for you this year.
Bonus Depreciation vs. Section 179 in 2026
Both write off equipment fast, but they behave differently under pressure.
| Section 179 | Bonus depreciation | |
|---|---|---|
| 2026 dollar cap | $2,560,000 | None |
| Phase-out threshold | $4,090,000 of property placed in service | None |
| Income limit | Cannot exceed taxable business income | None |
| Can create a loss | No (excess carries forward) | Yes |
| How it applies | Elected asset by asset | Automatic per class unless you elect out |
| Heavy SUV sub-limit | $32,000 | None |
Ordering matters. Section 179 is applied first, then bonus depreciation on the remaining basis, then regular MACRS on whatever is left. The Instructions for Form 4562 state it plainly at Part II, Line 14: the special allowance is taken “after any section 179 expense deduction and before you figure regular depreciation under MACRS.”
So when should a Schedule C filer still bother with Section 179 now that bonus is unlimited and permanent? Four situations:
- You want asset-level control. Section 179 is elected per asset, so you can expense the truck and depreciate the trailer. The election out of bonus under Section 168(k)(7) works per class of property, which is a blunter instrument.
- You do not want a loss. Section 179 stops at your business income. Bonus keeps going and can manufacture a net operating loss you may not want this year.
- Your state does not conform. A number of states decouple from Section 168(k) and require an addback with a separate state depreciation schedule, and some conform to Section 179 but not to bonus. Check your own state before assuming the federal answer travels.
- Vehicles. The Section 280F caps still bite. A passenger automobile placed in service in 2026 with bonus applied is limited to $20,300 of first-year depreciation, versus $12,300 without bonus. Run the numbers in the Section 179 deduction calculator, and if you drive a lot of business miles, compare against the standard mileage rate before committing to actual expenses.
For the wider picture of what else lands on the same form, see the Schedule C business deductions guide and the rundown of new deductions under the One Big Beautiful Bill.
Qualified Production Property: 100% on a Factory Building
Section 168(n), added by Section 70307 of the Act, is the other new 100% write-off, and it does something bonus depreciation never could: it reaches a building.
A taxpayer can elect to deduct 100% of the adjusted basis of qualified production property, meaning the portion of nonresidential real property used as an integral part of a qualified production activity and placed in service in the United States or a U.S. territory. That property normally sits on a 39-year life.
The windows are narrow. Construction has to begin after January 19, 2025 and before January 1, 2029, and the property has to be placed in service after July 4, 2025 and before January 1, 2031. Office, administrative, lodging, parking, sales, research, software development, and engineering space is excluded, though a de minimis rule in Notice 2026-16 lets the whole property qualify if 95% or more of the physical space is used in the qualified activity.
Two limits catch people out. “Production” here covers only agricultural and chemical production, and a “qualified product” excludes food or beverage prepared in the same building as the retail establishment that sells it. So the bakery attached to the storefront does not qualify. And if the facility stops being used in a qualified production activity within 10 years, Section 1245 recapture applies.
If you run a service business or a one-person shop, this section is not for you. Skip it.
Estimate Your 2026 Tax With the Deduction Applied
A depreciation deduction is not a standalone number. Writing off $60,000 of equipment lowers your Schedule C profit, which lowers your self-employment tax, which changes the base for your qualified business income deduction, which moves your refund. Those four things move together, and it is hard to see the net effect on a worksheet.
Figure the depreciation deduction first (or have your preparer run Form 4562), then enter the result as a Schedule C expense in Tax47 and watch the estimated refund, self-employment tax, and QBI deduction update live as you type. It will not compute depreciation for you, but it will show you what that deduction is actually worth on the return.
Related reading and tools: the QBI deduction guide, how the 15.3% self-employment tax works, the Schedule C profit calculator, and the QBI deduction calculator. When you want to run a full return, download the app.
Sources & References
- IRS Notice 2026-11: interim guidance on the additional first-year depreciation deduction under Section 168(k), including the acquisition-date rules and the permanent 100% rate.
- IRS Notice 2026-16: interim guidance on the special depreciation allowance for qualified production property under Section 168(n).
- Revenue Procedure 2025-32: 2026 inflation adjustments, including the Section 179 expensing cap, phase-out threshold, and SUV sub-limit at Section 4.24.
- Revenue Procedure 2026-15: 2026 passenger automobile depreciation limits under Section 280F.
- 26 U.S.C. Section 168: current statutory text as amended by P.L. 119-21.
- Reg. Section 1.168(k)-2: written binding contract definition, acquisition date rules, and the self-constructed property safe harbor.
- Instructions for Form 4562: the Section 179, then bonus, then MACRS ordering rule at Part II, Line 14.
- IRS Publication 946: how to depreciate property, including MACRS recovery periods.
This article is for educational purposes only and is not tax, legal, or financial advice. Tax rules change periodically, always check current IRS guidance or consult a qualified tax professional.
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Frequently Asked Questions
Is bonus depreciation still 100% in 2026?
Yes. The One Big Beautiful Bill Act made the 100% first-year bonus depreciation deduction permanent for qualified property acquired and placed in service after January 19, 2025. There is no scheduled phase-down, no dollar cap, and no placed-in-service deadline.
What is the January 19, 2025 acquisition date rule?
Permanent 100% bonus depreciation applies only to property acquired after January 19, 2025. Property covered by a written binding contract signed on or before that date keeps its older acquisition date and stays on the TCJA phase-down schedule, even if it is delivered much later.
What bonus depreciation rate applies if my contract predates January 20, 2025?
The old TCJA percentage for the year you place the property in service: 40% for 2025, 20% for 2026, and 0% for 2027. Property on the old schedule also has to be placed in service before January 1, 2027 to get anything at all.
Should I use Section 179 or bonus depreciation?
Section 179 is elected asset by asset and is capped at $2,560,000 for 2026, with the cap phasing out once you place more than $4,090,000 of qualifying property in service. It also cannot create a loss. Bonus depreciation has no dollar cap and no income limit and can create a net operating loss, but it applies automatically to a whole class of property unless you elect out. Many businesses apply Section 179 first for control, then take bonus on the remaining basis.
Does used equipment qualify for 100% bonus depreciation?
Yes, as long as the property is new to you, was not acquired from a related party, and meets the acquisition-date rules. Original use by you is no longer required. That changed under the TCJA and the One Big Beautiful Bill Act kept it.
Can bonus depreciation create a business loss?
Yes. Unlike Section 179, bonus depreciation is not limited to your taxable business income, so it can push a Schedule C or a partnership into a loss that becomes a net operating loss. Passive-activity and at-risk rules may still restrict when you can actually use that loss.
Does bonus depreciation apply to rental property?
Not to the building itself. Residential rental is 27.5-year property and nonresidential real property is 39-year, both longer than the 20-year ceiling. Shorter-lived components such as appliances, flooring, and land improvements can qualify, which is why investors commission cost segregation studies to separate them.
What is qualified production property?
A new election under Section 168(n) that lets a taxpayer deduct 100% of the basis of a qualifying factory or refining facility, which is nonresidential real property normally depreciated over 39 years. Construction has to begin after January 19, 2025 and before January 1, 2029, and the property has to be placed in service after July 4, 2025 and before January 1, 2031. If the facility stops being used in a qualified production activity within 10 years, Section 1245 recapture applies.