As we enter the 2026 tax year, one of the most powerful tax incentives for businesses is back—and this time, it’s here to stay. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, permanently restored 100% bonus depreciation under IRC Section 168(k). This reversal of the scheduled phase-out from the 2017 Tax Cuts and Jobs Act (TCJA) means businesses can once again deduct the full cost of qualifying assets in the year they’re placed in service.
Without OBBBA, bonus depreciation would have dropped to just 20% in 2026 before phasing out entirely in 2027. Instead, we’re looking at full expensing indefinitely—a game-changer for cash flow, capital planning, and investment decisions.
What Changed and When It Applies
• Pre-OBBBA Phase-Out Schedule (for reference):
• 2023: 80%
• 2024: 60%
• 2025: 40%
• 2026: 20%
• 2027+: 0%
• New Rules Under OBBBA:
• 100% bonus depreciation is permanent for qualified property acquired and placed in service after January 19, 2025.
• Property acquired on or before January 19, 2025, remains subject to the old phase-down (e.g., 40% if placed in service in 2025, 20% in 2026).
• A transitional election allows opting for lower rates (40% or 60%) in certain cases for strategic planning.
This cutoff date is critical: The IRS looks at binding contracts and acquisition timing, not just when the asset is paid for or delivered.
What Qualifies for 100% Bonus Depreciation?
The definition of “qualified property” hasn’t changed much:
• Tangible property with a MACRS recovery period of 20 years or less (e.g., machinery, equipment, vehicles, computers, software).
• Qualified improvement property (QIP)—interior improvements to nonresidential real estate.
• Certain other assets like water utility property.
New and used property both qualify, as long as it’s your first use (or meets used property rules).
Bonus for Manufacturers: Qualified Production Property (QPP)
OBBBA adds a temporary boost:
• Elective 100% expensing for certain nonresidential real property used in manufacturing, production, or refining tangible goods.
• Construction must begin after January 19, 2025, and before January 1, 2029; placed in service before January 1, 2031.
• This extends full expensing to longer-lived building components—huge for factories, refineries, and production facilities.
Real-World Impact: Quick Examples
• Manufacturing Business: Buys $5 million in new equipment in February 2026 and places it in service by year-end. Full $5 million deduction in 2026 → ~$1.05 million federal tax savings (at 21% corporate rate).
• Construction Company: Purchases heavy machinery (e.g., cranes) post-January 19, 2025. Immediate full write-off matches cash outflow with tax relief.
• Real Estate Investor: With cost segregation, shorter-life components (5-15 years) from a new acquisition qualify for 100% bonus—potentially massive accelerated deductions.
Pair this with Section 179 expensing (now permanently higher limits, indexed for inflation) for even more upfront relief on smaller purchases.
Planning Tips for 2026
• Accelerate Investments: If you’re on the fence about capex, now’s the time—permanent 100% expensing removes the old urgency of “use it or lose it.”
• Review Timing: Double-check acquisition dates for assets in progress. Late 2024 contracts could lock you into lower rates.
• Cost Segregation Studies: Essential for real estate and facilities to carve out bonus-eligible components.
• State Conformity: Not all states follow federal bonus rules—check your locations.
• Model the Impact: Large deductions can affect NOLs, interest limitations (Section 163(j)), or other provisions.
Final Thoughts: A Pro-Investment Shift
The revival of permanent 100% bonus depreciation signals strong support for business growth. It improves cash flow, encourages domestic investment, and levels the playing field against inflation and rising costs.
Business owner or planning capex this year? Run the numbers with your tax advisor early—2026 filings will reflect these changes when you file in 2027.
Are you accelerating purchases because of this? Or in manufacturing and eyeing QPP? Share your filing status or industry below—I read every comment and can help brainstorm scenarios.
Stay tuned for more 2026 breakdowns. Here’s to stronger balance sheets and lower effective tax rates.
Sources: IRS guidance, OBBBA (P.L. 119-21), Tax Foundation, and professional analyses. All rules subject to final IRS regulations.
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