Bonus Depreciation 2026: OBBBA Made 100% Permanent

#What changed for bonus depreciation in 2026

Before OBBBA, bonus depreciation was phasing down:

OBBBA, signed July 4, 2025, eliminated the phase-down for property acquired after January 19, 2025. The rate goes back to 100% and stays there permanently.

Important transition rule: the line that matters is the day you acquired the property. Say you signed a binding contract on or before January 19, 2025. The old rate applies: 40% if placed in service in 2025, 20% in 2026. If you signed after that, it is 100%. When you started using it does not change that.

#What qualifies for 100% bonus depreciation

Under IRC Section 168(k), qualifying property must:

1. Have a recovery period of 20 years or less under MACRS.
2. Be acquired and placed in service after the effective date.
3. Be the original use by the taxpayer, or meet specific used-property rules.
4. Not be excluded property. This covers certain regulated utilities, foreign-use property, and similar categories.

The property categories that qualify:

• 5-year property: vehicles, computers, office equipment, certain machinery.
• 7-year property: office furniture, fixtures, agricultural machinery.
• 15-year property: land improvements, qualified improvement property, certain leasehold improvements.
• 5/7/15-year cost segregation buckets: the personal-property and land-improvement components of real estate, identified through cost seg studies.

Critically: this includes the cost-seg-eligible portions of rental properties and commercial real estate. A $500K residential rental that gets cost seg’d typically has $140K to $160K of basis allocated to 5/7/15-year property. Under 100% bonus, that entire allocated basis deducts in year one.

#Why this matters for real estate investors

Cost segregation with 100% bonus can create a large deduction in year one. To use it against wages, you must qualify as a real estate professional, or meet the short-term rental rules. The yearly loss cap still applies. Without that, the loss waits for passive income. Recapture comes back when you sell.

Pre-OBBBA (under the 40% phase-down):

• $500K residential rental, cost-seg-eligible basis $140K.
• Year-1 bonus depreciation: $140K × 40% = $56K. The remaining $84K depreciates over the original 5/7/15-year schedules.
• Plus standard 27.5-year structure depreciation, ignoring land and the mid-month convention: about $13K.

Post-OBBBA (100% bonus):

• Same property: $140K × 100% = $140K immediate year-1 deduction.
• Plus about $13K of structure depreciation.
• Total year-1 deduction: ~$153K vs. ~$69K before

100% bonus adds about $84,000 to your year-one deduction on this example. At a 32% bracket, that is about $27,000 less tax in year one. In the 40% case you still get part of that $84,000 in later years. So most of the gain is timing. This applies for a taxpayer using STR loophole or REPS to apply the loss against W-2 income.

See the full cost seg fundamentals guide for the mechanics.

#Why this matters for equipment-heavy businesses

Beyond real estate, 100% bonus depreciation matters for:

Construction companies: heavy work trucks over 14,000 lbs can usually be fully deducted. Pickups and SUVs from 6,000 to 14,000 lbs have a $32,000 cap on Section 179 for 2026, though bonus depreciation may cover the rest. Cars under 6,000 lbs have yearly caps. You can only deduct the share used for business. Heavy equipment, tools, and machinery placed in service after Jan 19, 2025 can deduct in full in year one.

Trucking owner-operators: Class 8 tractors, trailers, refrigeration units, telematics equipment.

Medical + dental practices: chairs, x-ray equipment, diagnostic devices, technology. A $200K dental chair-and-x-ray purchase fully deducts year one.

Manufacturers: machinery, production equipment, robotics, conveyance systems.

Landscapers: bucket trucks, chippers, mowers, irrigation equipment.

For high-income business owners in equipment-heavy industries, year of purchase becomes a tax-planning lever. Timing a $300K equipment buy into a high-income year delivers a six-figure tax shelter at the top brackets.

#How it interacts with Section 179

For 2026, you can expense up to $2,560,000 of qualifying equipment under Section 179. The limit starts to shrink once you place more than $4,090,000 in service in the year. It is gone at $6,650,000. Bonus depreciation is a separate provision that takes over after Section 179 is maxed.

The interaction:

1. Apply Section 179 first, up to the limit.
2. Bonus depreciation applies to remaining basis at 100%.
3. Result: same as full expensing for most small and mid-business purchases.

For very large equipment buys (over Section 179 phase-out), bonus depreciation becomes the primary mechanism. For equipment in an active business that has enough income, Section 179 can expense the full cost up to the limit. It cannot make a loss, and it does not apply to most rental housing components. For those, use bonus depreciation.

#Look-back planning: amend prior returns?

For property already placed in service:

• Property placed in service 2023 to 2024, during the phase-down: cannot retroactively benefit from OBBBA’s 100% rule. The phase-down rates applied to those years.
• Property placed in service Jan 1-19, 2025: transition rule, still subject to the 40% phase-down.
• Property placed in service after Jan 19, 2025: 100% applies.

You generally cannot amend a prior return to claim more bonus depreciation. You are limited to what was available under the law at the time of placing it in service. However, Section 481(a) look-back studies for cost segregation remain valid. A look-back study lets you claim the depreciation you missed in past years, in one year, without amending. The bonus rate you get is the rate for the year you placed the property in service. A 2018 purchase gets 100%. A 2023 purchase gets 80%.

Say you have owned a property since 2018 and never had it cost seg’d. The look-back in 2026 would apply 100% bonus to the previously-unaccelerated 5/7/15-year buckets. That is a one-time event with potentially six-figure tax savings.

#What we do when you engage

For OBBBA-driven cost seg + equipment depreciation engagements:

1. Discovery call: confirm the property or equipment qualifies, and model year-one tax savings.
2. Cost segregation study for real estate. We do this in-house for sub-$1M properties, and partner with an engineering firm for $1M or more.
3. Section 481(a) look-back analysis, for properties owned 2 or more years without cost seg, to model the catch-up deduction.
4. Year-one tax projection, including the STR or REPS unlock if applicable.
5. Year-end planning, to time additional equipment purchases into high-income years and maximize the deduction value.

Engagement scope: $5,000 to $15,000 for a single-property cost seg engagement, and $10,000 or more for complex multi-property and look-back work. This rolls into a broader tax-planning advisory retainer for ongoing clients.

#Common questions

What is the bonus depreciation rate for 2026? For qualified property acquired after January 19, 2025, it is 100%, and OBBBA made that permanent. In January 2026, the IRS issued Notice 2026-11 as interim guidance (IR-2026-06, Jan. 14, 2026). This is our reading, so confirm it before you rely on it. Property acquired on or before January 19, 2025 stays on the old phase-down. That would have been 20% for property placed in service in 2026.

Does the 100% rule apply to used property? Yes, with conditions. Used property qualifies for bonus depreciation if you did not previously use it, with no prior depreciation taken by you. It also must not have been acquired from a related party, and the basis must not be determined by reference to the seller’s basis. Most arm’s-length purchases of used equipment qualify.

What if I bought property in 2024: can I still claim 100%? No. 2024 purchases got 60% bonus. The OBBBA rule applies to property acquired after Jan 19, 2025. Earlier purchases are locked into their then-current rate.

Can I do cost seg on a property I bought in 2025 before Jan 19? You can do the cost seg study, but the year-1 deduction follows the pre-OBBBA 40% phase-down rate for that property. Still better than no cost seg, but smaller than post-Jan-19 purchases.

Does this benefit me if I have no other income to offset? The deduction itself works regardless. But to USE the loss in the current year, you need offsetting income. That could be passive income from other rentals, or STR loophole income to offset W-2. It could also be REPS to characterize all rentals as non-passive, or active business income. Without one of those, the loss carries forward as a suspended passive loss.

What about depreciation recapture when I sell? Recapture applies regardless of bonus rate. When you sell, the extra depreciation comes back as tax. Personal property parts (5- and 7-year items) come back as ordinary income. Part of the building depreciation is taxed at up to 25%. A 1031 exchange can defer the building part. The personal property parts usually cannot be deferred that way.

Is the IRS guidance on OBBBA bonus depreciation complete? In January 2026, the IRS issued Notice 2026-11 as interim guidance, released January 14, 2026 (IR-2026-06), available at irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill. More rules may follow. Some operational details continue to evolve.

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Do you own real estate? Does your business buy significant equipment? If so, OBBBA’s 100% bonus depreciation likely changes your year-one tax position by five figures or more. The Discovery call is the right next step. We model the year-one impact and cost seg engagement against your specific facts.