For a few years, bonus depreciation was on a slow fade. The 100% write-off businesses loved was stepping down 20 points a year, sitting at 40% for property placed in service in 2025 and headed toward zero. Then the One Big Beautiful Bill Act flipped it back on. As of 2026, 100% bonus depreciation is not just restored, it is permanent.
That is a big deal for any business that buys equipment, vehicles, or other short-life assets. It means you can deduct the full cost of qualifying property in the year you put it to work, instead of spreading the deduction across years. Here is how the new rules work, the one date that decides everything, and how bonus depreciation fits alongside the other write-offs.
Bonus depreciation is a first-year deduction that lets you write off a large chunk, now the full cost, of qualifying property right away rather than depreciating it slowly under the normal schedule. It lives in Section 168(k) of the tax code.
Under the One Big Beautiful Bill Act, the deduction is back to 100% and made permanent, ending the phase-down that had it dropping each year. Permanence is the part that changes behavior. Businesses no longer have to rush purchases to beat a shrinking percentage, which makes planning capital spending far less of a guessing game.
Timing is the whole ballgame here. The restored 100% rate applies to qualified property acquired and placed in service after January 19, 2025.
That January 19, 2025 line matters because it separates the old phase-down world from the new permanent one. Property that was acquired under a written binding contract before that date can still fall under the older, lower percentages, so the acquisition date, not just when you started using the asset, is what you check first. The IRS laid out interim rules on how this works in Notice 2026-11, which businesses can rely on until full regulations arrive.
Bonus depreciation covers most of the tangible business assets you would expect. To be eligible, property generally has to be MACRS property with a recovery period of 20 years or less, which sweeps in machinery and equipment, computers, office furniture, and many vehicles. Certain qualified improvement property and some other specific categories also make the cut.
There is also an original-use and used-property rule. Bonus depreciation can apply to used property, not just new, as long as it is new to you and was not acquired from a related party or in certain carryover-basis transactions. That flexibility is one reason the deduction is so widely used, since a business buying a used piece of equipment can still write off the full cost.
What does not qualify is worth noting too. Real property with a long recovery period, like a building shell, generally falls outside bonus depreciation, though a separate new provision for qualified production property now reaches some factory buildings.
Bonus depreciation does not operate alone, and knowing how the pieces stack keeps you from leaving money on the table or double counting.
Section 179 expensing is the other big first-year write-off. It also lets you deduct the full cost of qualifying property, but it comes with dollar caps and a phase-out once purchases get large, and it cannot create a loss. Bonus depreciation has no such dollar cap and can create a loss, so many businesses apply Section 179 first to the assets they choose, then let bonus depreciation sweep up the rest. A cost segregation study often pairs well here, because it identifies shorter-life components inside a building that can qualify for bonus treatment.
Then there is qualified production property, the separate §168(n) provision for certain manufacturing buildings. It is easy to confuse with bonus depreciation because both offer 100%, but they cover different assets. Equipment and short-life property run through §168(k) bonus depreciation, while the production building itself may run through §168(n). Used together, they can expense a large share of a new facility.
One quiet interaction to watch is the business interest limitation under Section 163(j). Taking large first-year deductions can shift the math on how much interest expense a business can deduct, so for leveraged companies the two provisions need to be modeled together rather than in isolation.
The upside of permanence is that businesses can now build bonus depreciation into multi-year capital plans with confidence instead of chasing a deadline. That is genuinely good news, but capturing it correctly, sorting acquisition dates, coordinating with Section 179, and watching the interest limit, is where a careful hand pays off. If your business or your clients are planning equipment or facility investments, Madras Accountancy can model the depreciation options and make sure the full deduction is claimed cleanly.
1. Is 100% bonus depreciation permanent now? Yes. The One Big Beautiful Bill Act restored 100% bonus depreciation under Section 168(k) and made it permanent, ending the phase-down that had reduced it to 40% for 2025.
2. What is the key date for the 100% rate? Property must be acquired and placed in service after January 19, 2025. Property under a written binding contract before that date may fall under the older, lower percentages.
3. What property qualifies for bonus depreciation? Generally MACRS property with a recovery period of 20 years or less, such as machinery, equipment, computers, furniture, and many vehicles, plus certain qualified improvement property.
4. Can I use bonus depreciation on used equipment? Yes. Used property qualifies as long as it is new to you and was not bought from a related party or acquired in certain carryover-basis transactions.
5. How is bonus depreciation different from Section 179? Section 179 has dollar caps and a phase-out and cannot create a loss. Bonus depreciation has no dollar cap and can create a loss. Many businesses use Section 179 first, then apply bonus depreciation to the rest.
6. Does bonus depreciation cover buildings? Generally no. Long-life real property like a building shell falls outside it, though the separate qualified production property rules under Section 168(n) now reach some manufacturing buildings.
7. Where can I find the current IRS guidance? The IRS issued interim guidance in Notice 2026-11, which taxpayers can rely on until proposed regulations are finalized.
8. Should I still time purchases around year end? The urgency is lower now that the rate is permanent, but timing still affects your current-year deduction and can interact with the Section 163(j) interest limit, so planning purchases with an advisor is still worthwhile.
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