Bonus depreciation was supposed to be fading away. It had been stepping down 20 points a year and was on track to hit zero. Then the law reversed course and made 100% bonus depreciation permanent, and in early 2026 the IRS told everyone how it actually works. That guidance is Notice 2026-11, and if your clients buy equipment, it changes their planning in a big way.
The headline is simple: full expensing is back and here to stay. The details, as always, are where the money is. Here is what the notice says, the date that splits the old rules from the new, and what businesses should do about it.
For a few years, bonus depreciation was phasing down. The percentage a business could write off in year one dropped from 100% toward zero on a set schedule. The One Big Beautiful Bill reversed that, and Notice 2026-11 is the IRS interim guidance explaining the restored rules.
Per the IRS guidance on the additional first-year depreciation deduction, the notice confirms that 100% bonus depreciation applies to qualifying property and lets taxpayers rely on the existing section 168(k) framework while formal regulations catch up. In plain terms, the rules you already knew for bonus depreciation still apply, just at a permanent 100% rate rather than a shrinking one.
The qualifying property rules track the long-standing bonus depreciation framework. In general, this covers tangible property with a recovery period of 20 years or less, which sweeps in most equipment, machinery, vehicles, and similar business assets.
Notice 2026-11 also folds in qualified sound recording productions as eligible property, treating them as placed in service at initial release or broadcast. That is a niche addition, but it signals the notice is doing cleanup work as well as confirming the headline rate. The broad point for most businesses is that the everyday equipment they buy still qualifies for full expensing.
It helps to see what permanence changes in dollars. Say a landscaping business buys a $200,000 machine and places it in service in 2026. Under 100% bonus depreciation, the business writes off the full $200,000 in the first year. Under the old phase-down, that same machine in a 40% bonus year would have allowed only $80,000 of bonus in year one, with the remaining $120,000 depreciated over the asset's recovery period.
The permanent 100% rate is not just a bigger deduction, it is a predictable one. Businesses no longer have to race a shrinking percentage or guess what next year's rate will be. That certainty is what makes purchase timing a cleaner planning decision than it has been in years, especially for a company weighing a big equipment year against its expected income.
Full expensing is not the only immediate write-off in the code, and the two main tools work together rather than against each other. Section 179 and bonus depreciation both let a business deduct asset costs up front, but they have different rules on limits, income, and the types of property they cover.
A common approach is to apply Section 179 first for its flexibility, then let 100% bonus depreciation sweep up the rest, since bonus has no annual dollar cap and can create or increase a loss. The right order depends on the client's income and state conformity, so it is a planning decision, not an automatic one. For the underlying depreciation mechanics that sit beneath both, Publication 946 remains the reference.
One point of confusion is worth heading off. Alongside bonus depreciation, the law created a separate 100% deduction for qualified production property, aimed at factory and manufacturing buildings. That is a different provision with its own rules, covered in our piece on qualified production property depreciation.
Bonus depreciation under Notice 2026-11 is about equipment and shorter-lived assets. The production property deduction is about the buildings themselves. They can both apply to the same business, but they are not the same rule, and mixing them up leads to wrong numbers.
Permanent full expensing changes the calculus on timing purchases, so a little planning pays off.
Confirm acquisition dates on recent and planned purchases, since January 19, 2025 is the hinge between the old and new rules. Model whether accelerating a purchase into a high-income year makes sense now that 100% is permanent and predictable. Coordinate Section 179 and bonus depreciation in the right order for each client. And check state conformity, because not every state follows federal bonus depreciation, which can create a difference between the federal and state returns.
Because Notice 2026-11 is interim guidance, taxpayers can rely on it now, with formal regulations expected to follow. That gives businesses certainty to plan today without waiting.
Getting depreciation elections right across a book of clients is detailed, high-stakes work. Madras Accountancy supports US CPA firms with fixed-asset scheduling, election planning, and the depreciation calculations that keep every return accurate.
What is Notice 2026-11? It is IRS interim guidance explaining the permanent 100% bonus depreciation rules after the One Big Beautiful Bill. It confirms the restored 100% rate and lets taxpayers rely on the existing section 168(k) framework until formal regulations are issued.
Is bonus depreciation permanent now? Yes. The law reversed the scheduled phase-down and made 100% bonus depreciation permanent for qualifying property. Notice 2026-11 provides the interim guidance on how to apply it.
What is the key date for 100% bonus depreciation? January 19, 2025. Qualifying property acquired after that date and placed in service gets 100% bonus depreciation. Property under a binding contract before January 20, 2025 generally stays on the old phase-down schedule.
What property qualifies for bonus depreciation? Generally tangible property with a recovery period of 20 years or less, including most equipment, machinery, and vehicles. Notice 2026-11 also adds qualified sound recording productions as eligible property.
How does bonus depreciation differ from Section 179? Both allow immediate expensing, but Section 179 has annual dollar limits and an income limitation, while bonus depreciation has no dollar cap and can create a loss. Many businesses apply Section 179 first, then bonus depreciation on the remainder.
Is bonus depreciation the same as the factory deduction? No. Bonus depreciation under Notice 2026-11 covers equipment and shorter-lived assets. The 100% deduction for qualified production property is a separate provision aimed at manufacturing buildings.
Do all states follow 100% bonus depreciation? No. Many states do not conform to federal bonus depreciation, which can create a difference between the federal and state returns. Always check state conformity when planning the deduction.
Can I rely on Notice 2026-11 now? Yes. It is interim guidance that taxpayers may rely on, with formal regulations expected to follow. That lets businesses plan purchases and elections now without waiting for final rules.
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