§168(k) — Bonus Depreciation
Bonus depreciation lets a taxpayer deduct a percentage of qualified property’s cost in the year it is placed in service. As of October 16, 2026, the rate is 100 percent for qualified property acquired after January 19, 2025. Earlier binding-contract property stays on the prior phase-down.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- As of October 16, 2026, Public Law 119-21 made 100% bonus depreciation permanent for qualified property acquired after January 19, 2025.
- Property acquired after September 27, 2017 and before January 20, 2025 keeps the prior phase-down: 40% if placed in service in 2025 and 20% in 2026.
- A written binding contract can fix the acquisition date before closing.
- For the first tax year ending after January 19, 2025, a taxpayer may elect 40% (60% for certain long-production property and aircraft) instead of 100%.
- Notice 2026-11 is interim guidance; proposed regulations had not been published as of October 16, 2026.
Section 168(k) allows an additional first-year depreciation deduction for qualified property. Public Law 119-21, the July 4, 2025 law that the Public Law is titled as a reconciliation act and that the IRS describes as commonly known as the One, Big, Beautiful Bill Act, amended it to allow 100 percent for qualified property acquired after January 19, 2025, with no scheduled phase-down or expiration. The property must also be placed in service after that date.
For property acquired after September 27, 2017 and before January 20, 2025, the earlier rule continues. Under that rule, the rate was 100 percent for property placed in service after September 27, 2017 and before January 1, 2023, then 80 percent (2023), 60 percent (2024), 40 percent (2025), and 20 percent (2026). Certain long-production-period property and aircraft lag one year. Those percentages are as of October 16, 2026, from Notice 2026-11 and Publication 946 (2025).
The additional allowance is taken after any §179 expense and before regular MACRS on the remaining basis. It is an addition to the §167(a) deduction, not a separate Code allowance that bypasses the placed-in-service rules. Property that is not qualified property under §168(k)(2) does not get the rate, even if a study has assigned it a short recovery period.
Buildings recovered over 27.5 or 39 years are not qualified property because those periods exceed 20 years. Five-year, 7-year, and 15-year components identified in a cost segregation study, and qualified improvement property, can be qualified property if the other tests are met. Used property can qualify if the acquisition rules are met. Property required to use ADS does not qualify.
This page is educational information, not tax advice. Which rate applies can turn on the acquisition date, contract terms, and elections. Those are questions for the taxpayer’s CPA. Super Intelligence is a proposed workflow for organizing documents; it does not compute a bonus percentage or file a return.
Elections
A taxpayer can elect out of bonus depreciation for any class of property for a year under §168(k)(7). The election is made on a timely filed return. It applies to all qualified property in that class placed in service that year.
For the first tax year ending after January 19, 2025, a taxpayer can also elect a reduced 40 percent rate (60 percent for long-production-period property and certain aircraft described in §168(k)(2)(B) or (C)) instead of 100 percent. That transition election is in amended §168(k)(10) and is explained in Notice 2026-11 §4.03. It is available only for that first year ending after the cutoff.
Notice 2026-11 also describes elections for specified plants, for treating certain components of larger self-constructed property as separately eligible, and for electing out for a qualified sound recording production. Those elections are fact-specific. This page does not tell a reader which election to make.
What qualifies
Qualified property generally includes MACRS property with a recovery period of 20 years or less, certain computer software, water utility property, and qualified film, television, live theatrical, and — after the 2025 law — sound recording productions. Original use with the taxpayer is not required if the used-property acquisition rules are met.
Publication 946 lists exclusions including property placed in service and disposed of in the same year, property converted to personal use in the acquisition year, property required to use ADS (including listed property used 50 percent or less for business), property for which the taxpayer elected out, and certain property of businesses excluded under §168(k)(9).
Public Law 119-21 struck a former paragraph of §168(k)(2)(E) and renumbered the rest. The used-property acquisition rule that older sources cite as §168(k)(2)(E)(ii) is now §168(k)(2)(E)(i). Eligibility details belong on the bonus-eligibility page.
Acquisition date versus placed-in-service date
The 100 percent rate turns on acquisition after January 19, 2025, not only on the year the property is placed in service. Section 70301(c)(4) of Public Law 119-21 states that property is not treated as acquired after the date a written binding contract for it is entered into.
A building under a binding contract signed before January 20, 2025 that closes later is treated as acquired on the contract date. Its qualified components then follow the phase-down rate for the year they are placed in service — 40 percent for 2025 placements and 20 percent for 2026 placements, as of October 16, 2026.
Notice 2026-11 applies the existing acquisition-date rules of Treas. Reg. §1.168(k)-2(b)(5) with the new dates substituted. Self-constructed property and non-binding contracts have their own tests. Those rules are on the acquisition-date page.
Guidance status
IRS Notice 2026-11, announced in IR-2026-06 on January 14, 2026, provides interim guidance applying the existing §1.168(k)-2 regulations with the new dates. Taxpayers relying on it must follow its sections 3 through 5 in their entirety for all eligible property.
Proposed regulations implementing the 2025 amendments are listed on the Unified Agenda (RIN 1545-BR95) but had not been published in the Federal Register as of October 16, 2026. Until they are, the notice is the IRS’s published interim position.
The IRS Cost Segregation Audit Techniques Guide (Publication 5653, February 2025) predates Public Law 119-21 and does not reflect the current 100 percent rule. The ATG is examiner guidance, not authority for the rate. Older articles or calculators that show 60 percent or 40 percent as the current rate are describing property under the prior rule or an outdated summary.
Sources
- 1
- 2Public Law 119-21 (July 4, 2025), §§70301, 70306, 70307(opens in a new tab)
The 2025 reconciliation law, which the IRS describes as commonly known as the One, Big, Beautiful Bill Act.
- 3
- 4
- 5IRS Publication 946 — How To Depreciate Property (2025)(opens in a new tab)
Appendix B reproduces the Rev. Proc. 87-56 class lives.