For 2026, 100% bonus depreciation is reinstated by the One Big Beautiful Bill Act (OBBBA, P.L. 119-21) for qualified property acquired after January 19, 2025. If you bought equipment, made interior renovations, or placed qualifying assets in service this year and the acquisition date clears that cutoff, you can write off the entire cost in year one.
Three things to do right now:
- Verify acquisition dates. The trigger is when you acquired the property, not when you placed it in service. A written binding contract signed on or before January 19, 2025 keeps the asset on the old TCJA phase-down schedule, even if it arrived in 2026.
- Confirm business use exceeds 50%. Listed property (vehicles, computers) requires documented business-use percentage above 50% before any bonus applies.
- Decide on your Section 179 and elect-out strategy by class before filing. These elections are made on a timely-filed return and generally cannot be changed after the deadline.
The IRS and Treasury issued guidance confirming that the existing regulatory framework applies, with January 19, 2025 substituted for the original TCJA cutoff date. Form 4562 (Depreciation and Amortization) is where all of this lands on your return.
Table of Contents
- What assets qualify for 100% bonus depreciation in 2026?
- What are the critical dates and rules under the OBBBA?
- How do you calculate bonus depreciation for 2026?
- How do bonus depreciation and Section 179 interact?
- How do you claim bonus depreciation on your 2026 return?
- How does state tax conformity affect your 2026 bonus depreciation?
- Practical tax-planning strategies for 2026
- Key Takeaways
- The real risk most businesses miss with bonus depreciation
- How Tolliver Bookkeeping and Tax handles 2026 bonus depreciation for you
- Useful sources
- FAQ
What assets qualify for 100% bonus depreciation in 2026?
The core eligibility rule is straightforward: tangible personal property with a MACRS recovery period of 20 years or less qualifies. That covers most business equipment, machinery, furniture, fixtures, and off-the-shelf computer software. Qualified Improvement Property (QIP) — interior improvements to nonresidential buildings — has a 15-year MACRS life and is fully eligible, making it one of the most valuable categories for businesses renovating leased or owned commercial space.
Other eligible categories include water utility property, certain waste treatment facilities, and qualified film, television, and live theatrical production property under specific rules.
Used property qualifies as long as it is “new to the taxpayer.” You cannot have previously used, or had a prior depreciable interest in, the property. Purchases from related parties are generally excluded.
Listed property and vehicle caps
Passenger automobiles are subject to Section 280F luxury auto caps regardless of bonus depreciation. For 2026, passenger vehicles are subject to first-year limits with bonus depreciation applied; heavy SUVs and trucks with a gross vehicle weight rating (GVWR) above 6,000 pounds are not subject to the passenger auto caps but are subject to a Section 179 SUV limit for tax years beginning recently, indexed annually. All listed property still requires business use above 50% to claim any accelerated depreciation.
Pro Tip: The most common confusion points are component QIP (interior improvements that must be separately identified from structural components), large trucks just over the 6,000-lb GVWR threshold, and self-constructed property where individual components may have different acquisition dates. Document each component’s acquisition date separately.
What are the critical dates and rules under the OBBBA?
The OBBBA restored 100% bonus depreciation by amending Section 168(k) of the Internal Revenue Code, keying eligibility to the acquisition date rather than the placed-in-service date. IRS and Treasury guidance confirms the existing binding-contract rules carry over with the new cutoff.
How the acquisition test works
Property is treated as acquired on the date a written binding contract for its purchase is signed. If that contract was executed on or before January 19, 2025, the asset stays on the TCJA phase-down schedule regardless of when it is placed in service. This is one of the most common planning traps: a business owner signs a purchase contract in late 2024, the equipment arrives in 2026, and the owner assumes 100% bonus applies. It does not.
| Acquisition date | Placed in service | Applicable rate |
|---|---|---|
| On or before Jan. 19, 2025 (binding contract) | 2026 | 20% (TCJA phase-down) |
| After Jan. 19, 2025 | 2026 or later | 100% (OBBBA restored) |
Key rules to keep straight:
- The placed-in-service date still matters for when you claim the deduction — property must be placed in service during the tax year you claim it.
- Self-constructed property uses the date construction begins as the acquisition date in most cases, subject to component election rules under IRS Notice 2026-11.
- Property acquired from a related party or in a nontaxable exchange does not qualify.
- The election to use a reduced bonus rate (rather than 100%) for a class of property must be made on a timely-filed return.
How do you calculate bonus depreciation for 2026?
The deduction sequence matters. IRS Publication 946 prescribes the order: apply Section 179 first if elected, then Section 168(k) bonus depreciation on the remaining qualified basis, then regular MACRS on whatever basis is left. Getting this wrong produces incorrect NOL and basis figures.
Three worked scenarios
| Scenario | Asset cost | Section 179 applied | Bonus depreciation (100%) | Remaining MACRS basis | First-year deduction |
|---|---|---|---|---|---|
| Equipment purchase | $150,000 | $50,000 | $100,000 | $0 | $150,000 |
| Passenger auto (280F cap) | $65,000 | $0 | $20,300 (capped) | $44,700 | $20,300 |
| QIP renovation | $200,000 | $0 | $200,000 | $0 | $200,000 |
Scenario 1 — Small business equipment: A Kern County manufacturer buys $150,000 in machinery in March 2026 (acquisition date after January 19, 2025). The owner elects $50,000 of Section 179, leaving $100,000 of basis. Bonus depreciation wipes out the remaining $100,000. Total first-year deduction: $150,000. Taxable income drops by the full purchase price.
Scenario 2 — Passenger vehicle: A business purchases a $65,000 sedan for 90% business use. Even with 100% bonus depreciation available, Section 280F caps the first-year deduction at $20,300. The remaining $44,700 depreciates under the regular MACRS schedule over subsequent years.
Scenario 3 — QIP renovation: A restaurant spends $200,000 on interior improvements to a leased space in 2026. QIP has a 15-year MACRS life and qualifies for 100% bonus. The entire $200,000 is deductible in year one, producing a significant reduction in taxable income — or potentially an NOL if income is insufficient to absorb it.
Step-by-step computation workflow for Form 4562
- Identify all assets placed in service during the tax year and confirm acquisition dates.
- Separate listed property (vehicles, computers) and verify business-use percentages.
- Determine which assets are eligible for Section 179 and calculate the elected amount (subject to the taxable income limitation).
- Apply bonus depreciation to remaining qualified basis at 100% for post–January 19, 2025 acquisitions.
- Calculate regular MACRS on any remaining basis.
- Transfer totals to Form 4562, Parts I (Section 179), II (Special Depreciation Allowance), and III (MACRS).
How do bonus depreciation and Section 179 interact?
They are complementary tools, not alternatives. The IRS-mandated ordering means Section 179 always comes first, which gives you a lever to control taxable income before bonus depreciation takes over.
| Feature | Section 179 | Bonus depreciation (Sec. 168(k)) |
|---|---|---|
| Eligible assets | Most tangible personal property, QIP, some real property improvements | Tangible personal property ≤20-year MACRS, QIP, software |
| Used property | Yes | Yes (“new to taxpayer”) |
| Dollar cap | $2,500,000 (2025 tax year; indexed) | None |
| Taxable income limit | Yes — cannot create a loss | None — can create or increase an NOL |
| Elective | Yes — must elect | Automatic (elect out to opt off) |
| Placed-in-service test | Yes | Yes (plus acquisition date test) |
The taxable income limitation on Section 179 is the critical difference. If your business income is $80,000 and you elect $120,000 of Section 179, the excess $40,000 carries forward. Bonus depreciation has no such limit — it can push you into an NOL, which carries forward under current law but does not produce an immediate refund for most businesses.
Pro Tip: Use Section 179 to target specific assets and land taxable income where you want it. Then let bonus depreciation handle the remaining basis. If you are near breakeven, model the NOL impact before defaulting to full expensing — an NOL that carries forward at a lower future rate may be worth less than a current-year deduction at your current rate.
The interaction between these two provisions is where most of the planning value lives. Partnerships and S-corporations need to track basis adjustments carefully when bonus depreciation creates losses that flow through to partners or shareholders.
How do you claim bonus depreciation on your 2026 return?
Everything runs through Form 4562. Here is the filing sequence:
- Part I (Section 179): List each asset elected for Section 179 expensing, the cost, and the elected amount. Calculate the taxable income limitation.
- Part II (Special Depreciation Allowance): Report bonus depreciation on Line 14 for qualified property other than listed property. This is where 100% bonus depreciation for post–January 19, 2025 acquisitions appears.
- Part III (MACRS Depreciation): Report any remaining basis after Section 179 and bonus depreciation under the applicable MACRS convention and recovery period.
- Part V (Listed Property): Report vehicles and other listed property here, including business-use percentage and the Section 280F limitation.
- Elections: Attach a separate written statement to the return to elect out of bonus depreciation for a specific class of property (e.g., all 5-year MACRS property). The statement must identify the class and the tax year.
Electing out and amended returns
An elect-out applies to an entire class of property for the tax year — you cannot cherry-pick individual assets within a class. Once made on a timely-filed return (including extensions), the election is generally irrevocable without IRS consent. If you miss the election and want to change it, a private letter ruling or automatic consent procedure may be required, depending on the situation. Keep acquisition contracts, purchase invoices, and business-use logs as supporting documentation — these are the first items an IRS examiner will request.
How does state tax conformity affect your 2026 bonus depreciation?
Federal bonus depreciation does not automatically reduce your state taxable income. States fall into three broad categories: those that fully conform to federal bonus depreciation, those that decouple entirely and require an add-back, and those that conform to a fixed IRC date (meaning they may be operating under pre-OBBBA rules). California, for example, has historically decoupled from federal bonus depreciation, requiring businesses to add back the federal deduction and use California’s own depreciation schedule.
State conformity varies widely, and the OBBBA’s restoration of 100% bonus creates a new conformity question for every state that had not yet updated its IRC reference date.
State conformity checklist
Use this template for each state where the business files:
- What is the state’s IRC conformity date? Does it predate January 19, 2025?
- Does the state require a bonus depreciation add-back on the state return?
- What is the state’s Section 179 cap (many states use lower limits than federal)?
- Does the state allow a future deduction for amounts added back federally?
- Are there correction procedures or amended-return requirements if the state updates conformity mid-year?
Pro Tip: Multistate entities face the biggest exposure here. A California-based business with operations in a conforming state may have dramatically different state tax outcomes for the same asset purchase. Run a state-by-state depreciation schedule before finalizing your federal strategy — the federal deduction that looks optimal may produce an unexpected state liability.
Practical tax-planning strategies for 2026
Bonus depreciation is a powerful tool, but reflexively taking 100% expensing on every qualifying asset is not always the right call. Here is a prioritized approach:
- Use component elections for construction projects — Under IRS Notice 2026-11, qualifying components of a larger self-constructed project can be separately elected for bonus depreciation even when the overall project spans the cutoff date. Identify and document components with post–January 19, 2025 acquisition dates.
Pro Tip: Run at least two scenarios before filing: one with full bonus depreciation and one with an elect-out. The difference in current-year tax, NOL carryforward value, and state tax liability often surprises business owners who assumed maximum expensing was always the winner.
Pro Tip: For leased property, bonus depreciation generally does not apply — the lessee does not own the asset. If you are deciding between leasing and purchasing equipment, the ability to take 100% bonus depreciation in year one is a real factor in the after-tax cost comparison.
Key Takeaways
The OBBBA restored 100% bonus depreciation for qualified property acquired after January 19, 2025, making the acquisition date the single most important fact on every 2026 asset purchase.
| Point | Details |
|---|---|
| Acquisition date controls eligibility | Property under a binding contract signed on or before Jan. 19, 2025 gets 20%, not 100%, even if placed in service in 2026. |
| Ordering rule is mandatory | Apply Section 179 first, then bonus depreciation on remaining basis, then MACRS — in that sequence. |
| Bonus depreciation can create an NOL | Unlike Section 179, there is no taxable income limit; model the NOL impact before defaulting to full expensing. |
| State conformity is not automatic | Many states decouple from federal bonus depreciation or use a fixed IRC date; run a state-level add-back analysis for every filing state. |
| Tolliver Bookkeeping and Tax | Provides acquisition-date reviews, state conformity modeling, and Form 4562 preparation for Kern County businesses. |
The real risk most businesses miss with bonus depreciation
Most articles about bonus depreciation focus on the upside: the full write-off, the cash-flow benefit, the reduced tax bill. What gets less attention is the downstream cost of getting it wrong.
The binding-contract trap is the one that shows up most often in practice. A business owner signs a purchase agreement in December 2024, takes delivery in February 2026, and assumes the OBBBA’s 100% rate applies because the asset is placed in service after the cutoff. It does not. The acquisition date governs, and that contract date puts the asset on the old 20% schedule. The difference on a $300,000 equipment purchase is $240,000 in deductions — in year one alone.
The second underappreciated risk is the NOL trap. Bonus depreciation has no taxable income limit, which means it can push a profitable business into a loss position. That sounds like a good problem until you realize the NOL carries forward at a rate that may be lower than today’s, the state may not allow the same carryforward, and the business may have triggered AMT exposure in the process. The right answer is almost never “take everything you can.” It is “model the outcomes and choose deliberately.”
State conformity deserves more attention than it gets. California’s decoupling from federal bonus depreciation is well known, but the OBBBA’s restoration creates new conformity questions in states that had not updated their IRC reference dates. A business filing in multiple states needs a state-by-state depreciation schedule, not just a federal one.
The businesses that get the most value from 100% bonus depreciation are the ones that treat it as a planning tool rather than a default setting. That means reviewing acquisition dates before signing contracts, modeling Section 179 and bonus depreciation together, and checking state conformity before the return is filed — not after.
How Tolliver Bookkeeping and Tax handles 2026 bonus depreciation for you
Knowing the rules is one thing. Applying them correctly to your specific assets, income position, and state filing obligations is where the real work happens.
Tolliver Bookkeeping and Tax keeps bookkeeping and tax under one roof for Kern County businesses, which means your depreciation schedule is built from the same records as your books — no translation errors, no missed acquisition dates, no year-end surprises. For 2026 bonus depreciation planning, the firm’s process covers acquisition-date verification, Section 179 and bonus depreciation modeling across scenarios, state conformity analysis, and complete Form 4562 preparation. For laundromat owners evaluating equipment purchases, the LaundryList service integrates depreciation planning directly into your bookkeeping workflow.
If you are ready to see what 100% expensing actually does to your 2026 tax bill, start with a tax planning consultation or review business tax preparation costs to understand what a full-service engagement looks like.
This article provides general information about federal tax law and is not a substitute for professional tax advice. Tax rules change frequently and outcomes vary by taxpayer situation. Consult a qualified tax professional or the IRS directly to confirm current rules for your specific circumstances.
Useful sources
The following primary sources are the authoritative references for 2026 bonus depreciation. Consult them in this order: the IRS/Treasury guidance first for the statutory rule, Publication 946 for computation mechanics, and Form 4562 instructions for the actual filing entries.
- IRS and Treasury guidance on OBBBA bonus depreciation — the authoritative notice confirming the January 19, 2025 acquisition-date cutoff and the application of existing regulatory rules.
- CALT — Bonus Depreciation Updates for the 2026 Filing Season — Iowa State University Center for Agricultural Law and Taxation’s filing-season update; useful for practitioners needing a structured overview of the changes.
Keep copies of all acquisition contracts, purchase invoices, and business-use logs. These are the documents an IRS examiner will request first if a large bonus depreciation claim is questioned.
FAQ
What qualifies for 100% bonus depreciation in 2026?
Tangible personal property with a MACRS recovery period of 20 years or less, QIP (15-year property), and certain computer software qualify, provided the property was acquired after January 19, 2025 and placed in service during the tax year. Used property qualifies if it is new to the taxpayer.
Is 100% bonus depreciation actually back for 2026?
Yes. The OBBBA (P.L. 119-21) restored 100% bonus depreciation for qualified property acquired after January 19, 2025, reversing the TCJA phase-down that had reduced the rate to 20% for 2026 under prior law.
Bonus depreciation itself has no dollar cap. Section 179, which is separate, has a limit of $2,500,000. Passenger vehicles are still subject to Section 280F caps — $20,300 first-year with bonus depreciation applied.
Does a binding contract signed in 2024 affect 2026 bonus depreciation?
Yes, and this is the most common planning trap. A written binding contract executed on or before January 19, 2025 keeps the asset on the old TCJA phase-down schedule (20% for 2026), even if the property is placed in service after that date.
Who handles 2026 bonus depreciation planning for Kern County businesses?
Tolliver Bookkeeping and Tax provides acquisition-date reviews, Section 179 and bonus depreciation scenario modeling, state conformity analysis, and Form 4562 preparation for small and medium-sized businesses in Kern County. Contact the firm through tollivercpa.com to schedule a consultation.