For qualifying business property acquired after January 19, 2025, federal law generally allows a 100% additional first-year depreciation deduction under amended Internal Revenue Code section 168(k). It is not an automatic write-off for every business purchase: eligibility depends on the asset, how and when it was acquired, when it was placed in service, and the taxpayer’s circumstances.
Public Law 119-21 restored the 100% allowance, and IRS Notice 2026-11 provides interim guidance. This article describes U.S. federal rules reflected in IRS Publication 946 (2025) and guidance available in 2026; check current IRS forms, instructions, and guidance before filing because rules and procedures can change.
What changed under the law?
Public Law 119-21, enacted July 4, 2025, amended section 168(k) to restore a 100% additional first-year depreciation deduction for qualifying property in the post-January 19, 2025 acquisition cohort. The allowance is generally automatic unless the taxpayer elects out, subject to statutory requirements and exceptions. “Permanent” describes the current statute, not a guarantee that Congress will never change it. Public Law 119-21, section 70301; IRS Publication 946 (2025).
Bonus depreciation is a deduction against taxable income, not a cash rebate or a promise that a business will save an amount equal to the asset’s cost. The tax effect depends on the business’s basis, income, ownership, other tax rules, and the timing of deductions.
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Which property may qualify?
The IRS lists several broad categories of qualified property. Being used in a business does not by itself make an asset eligible; the property and taxpayer must meet the detailed requirements and exceptions in the law and applicable guidance.
- Tangible MACRS property: Property depreciated under the Modified Accelerated Cost Recovery System with a recovery period of 20 years or less.
- Certain software: Computer software within the definition in section 167(f)(1).
- Water utility property.
- Specified productions: Qualified film, television, and live theatrical productions, and certain qualified sound-recording productions.
- Certain used property: Used assets can qualify, but not every used-property acquisition meets the statutory conditions.
- Specified plants: Certain plants bearing fruits or nuts may qualify, subject to the section 168(k)(5) election.
See IRS Publication 946 for the categories and conditions; the statute and Notice 2026-11 address additional eligibility rules.
Why the acquisition date and placed-in-service date both matter
The restored 100% rule generally applies to qualifying property acquired after January 19, 2025 and placed in service after that date. The acquisition date is not always the day the asset arrives or the purchase is paid for. Under the statute, property is not treated as acquired after January 19 if a written binding contract for its acquisition was entered into on or before that date. The relevant contract rules can turn on enforceability under state law, cancellation rights, contingencies, and other details. Self-constructed property and commissioned productions may also require separate analysis. Public Law 119-21, section 70301; Notice 2026-11.
Placed in service generally concerns when property is ready and available for its assigned business use, not simply when it was ordered or delivered. Because acquisition and placed-in-service dates determine which percentage may apply, keep the contract, invoices, delivery and installation records, and evidence of when the asset became ready for use.
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The transition can produce different percentages for property placed in service during 2025, depending on its acquisition cohort. The following summarizes the federal percentages described in IRS Publication 946 and the statute; it is not a substitute for applying the exact eligibility and date rules to an asset.
| Acquisition cohort and conditions | General federal treatment |
|---|---|
| Qualifying property acquired after January 19, 2025 and placed in service after that date | 100% additional first-year depreciation, unless the taxpayer elects out or another rule changes the result. |
| Certain property acquired after September 27, 2017, but not in the post-January 19, 2025 cohort, and placed in service after December 31, 2024 and before January 1, 2026 | Generally 40%; qualifying long-production-period property and certain aircraft generally have a 60% percentage. |
| Qualifying property placed in service in the taxpayer’s first taxable year ending after January 19, 2025, where the taxpayer makes the transitional election | The taxpayer may elect 40% for certain property, or 60% for qualifying long-production-period property and certain aircraft, instead of the otherwise applicable 100% percentage. |
The middle row concerns the earlier acquisition cohort that remains under the phase-down rule; it should not be confused with the separate election available for the first taxable year ending after January 19, 2025. A purchase date alone does not settle which row applies: binding-contract rules and any special construction or production rules can affect the result. IRS Publication 946 (2025); Public Law 119-21, section 70301.
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Should a business use 100%, elect a lower percentage, or elect out?
There is no universally best choice. The 100% allowance accelerates a deduction; it does not necessarily maximize a business’s overall tax benefit. A lower transitional percentage or an election out may be worth examining when the business wants deductions in later years, has limited current-year taxable income, or faces interactions with other tax provisions. The consequences depend on the taxpayer’s facts and on applicable federal and state rules.
State tax treatment can differ from federal treatment. The materials cited here do not establish conformity for any particular state, so check the rules where the business files. Do not assume that the federal percentage carries over to a state return.
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1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsThe transitional 40% or 60% option applies only in the specified first taxable year and to the qualifying property described by the statute. The exact return mechanics and election deadlines should be checked against current IRS instructions, including the current Form 4562 instructions. IRS Notice 2026-11 provides interim guidance on eligibility and deduction calculations; the IRS release says proposed regulations are intended. Notice 2026-11; IRS News Release IR-2026-06.
What to gather before deciding whether an asset qualifies
- Acquisition evidence: Purchase agreement, binding-contract date, cancellation terms, contingencies, invoices, and payment records.
- Placed-in-service evidence: Delivery, installation, readiness, and records showing when the property was available for its intended business use.
- Asset details: Property description, business use, MACRS classification and recovery period, whether it is new or used, and any special production or construction facts.
- Return and planning facts: Tax year, taxable income, relevant limitations, expected future deductions, federal and state filing locations, and the intended election.
- Current filing guidance: Applicable IRS publications, notices, regulations, forms, and instructions for the return year.
For a binding contract, used asset, self-constructed project, or election decision, a CPA or enrolled agent familiar with depreciation can review the transaction-specific facts. The applicable guidance is interim as reflected in Notice 2026-11, so confirm the latest IRS materials and filing instructions when preparing a return.
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