Updated August 2026. This article originally described bonus depreciation as phasing out under the Tax Cuts and Jobs Act. It has been rewritten: the One Big Beautiful Bill Act restored a permanent 100% first-year deduction for qualified property acquired after January 19, 2025, and the phase-down now applies only to property acquired on or before that date.
For most of the last decade, planning around bonus depreciation meant planning around a deadline. That is no longer true. The One Big Beautiful Bill Act restored the full 100% first-year deduction and made it permanent — but only for property acquired after a specific date. Property you locked in before that date is still walking down the old phase-out schedule. One date decides which set of rules you are under, and it is not the date you started using the asset.
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The date that decides everything: January 19, 2025
Qualified property acquired after January 19, 2025 gets a 100% first-year deduction, permanently. There is no phase-down and no expiration. The old requirement that property be placed in service before January 1, 2027 was repealed outright for this property.
Qualified property acquired on or before January 19, 2025 stays on the Tax Cuts and Jobs Act phase-down schedule:
- 2023: 80%
- 2024: 60%
- 2025: 40%
- 2026: 20%
- 2027 and beyond: 0%
For that older property the original placed-in-service deadline still bites: it has to be in service before January 1, 2027 to get anything at all. So if you signed a purchase contract in 2024 and the equipment is still sitting undelivered, you are in the 20% bucket for 2026, and you lose even that if it is not operational by year-end.
Source: IRS Notice 2026-11 (IR-2026-06, January 14, 2026); see also the IRS announcement of the guidance.
What “acquired” actually means
This is where people get the answer wrong, because “acquired” is not the delivery date and not the in-service date. The IRS applies the written binding contract rule: property is not treated as acquired after the date you entered into a written binding contract to acquire it. Sign a binding contract on January 10, 2025 and take delivery in March — you are on the old schedule, not the new one.
For property you build yourself, the test is when physical work of a significant nature begins. There is a safe harbor: work counts as significant once you have incurred or paid more than 10% of the total cost, excluding land and preliminary planning activities.
If you have a purchase that straddles that window, the contract file is the first thing to pull. It is worth being precise here, because the difference between the two answers on a $500,000 equipment package is a $500,000 deduction versus a $100,000 one.
What still qualifies
Bonus depreciation applies to property with a recovery period of 20 years or less. That covers most equipment, furniture, computers, vehicles (with limits, below), and the components a cost segregation study carves out of a building purchase — the 5-year, 7-year, and 15-year buckets. The 27.5-year residential building shell doesn’t qualify for bonus, but the personal property and land improvements inside it do.
Cost segregation is worth more than it was
The restoration changes the math on cost segregation studies, and it changes it in your favor. A study that carves $200,000 of basis out of a building into 5- and 15-year property now produces a $200,000 first-year deduction, assuming the building was acquired after January 19, 2025. Under the schedule this article used to describe, that same study in 2026 would have produced $40,000. We covered the mechanics in our cost segregation guide.
If you bought property earlier and never commissioned a study, the deduction is not gone. A Form 3115 change in accounting method lets you catch up the missed depreciation in the current year, at whatever bonus percentage applied when that property was acquired and placed in service. For a 2022 or 2023 acquisition, that is a high percentage. Don’t leave it on the table.
You can elect a lower percentage — and sometimes should
Section 168(k)(10) lets you elect 40% instead of 100% (60% for certain longer production period property and aircraft) for the first taxable year ending after January 19, 2025. That sounds like giving money away, and usually it is. But a 100% deduction is only worth something if you have income to absorb it. Taking the full write-off can push a business into a loss, strand the benefit in a net operating loss carryforward, and waste deductions you could have used against a higher marginal rate later.
The election is made on Form 4562 by the due date of the return including extensions, and it applies to all qualified property in that class. It is a real planning lever, not a technicality — but it is a one-shot decision for that year, so it wants a projection behind it rather than a hunch.
Section 179 is bigger than it used to be
Section 179 was raised substantially by the same legislation. For tax years beginning in 2026 you can expense up to $2,560,000, reduced dollar-for-dollar once you place more than $4,090,000 of Section 179 property in service. Both figures are indexed for inflation.
With bonus back at 100%, Section 179 matters less as a substitute and more as a complement. It reaches things bonus does not — notably improvements to nonresidential real property like roofs, HVAC, fire protection, and security systems. It also carries an income limitation that bonus does not: you cannot use Section 179 to create a loss, while bonus depreciation can. Most planning now runs Section 179 first on the property only it covers, then lets bonus handle the rest.
Source: IRS Rev. Proc. 2025-32, §4.24.
Vehicles: the weight class still decides the outcome
Heavy SUVs, trucks, and vans over 6,000 lbs gross vehicle weight, used more than 50% for business, avoid the luxury auto caps and can take bonus depreciation on the business-use portion. Section 179 on an SUV is separately capped at $32,000 for 2026, but bonus is not, which is why the two get stacked.
Light vehicles are capped no matter what you paid. For passenger automobiles placed in service in 2026, the first-year ceiling is $20,300 with bonus depreciation and $12,300 without, then $19,800 in year two, $11,900 in year three, and $7,160 each year after. A $90,000 sedan and a $45,000 sedan get the same first-year deduction.
Source: IRS Rev. Proc. 2026-15.
Placed in service still matters
The acquisition date decides your percentage. The placed-in-service date decides your year. Property has to be both purchased and placed in service before year-end to deduct it on that year’s return, and “placed in service” means available for use — equipment installed and operational, or a vehicle delivered and on the road. Equipment sitting in the warehouse on December 31 is a next-year deduction.
Now that the deduction is permanent, this is a cash-flow and rate question rather than a use-it-or-lose-it one. Pushing a purchase into January no longer costs you the deduction. It just moves it.
The bottom line for Houston business owners
If you are buying now, you are in the 100% regime and it is not going away. That removes the artificial year-end pressure that drove a lot of December equipment purchases, and it replaces it with a better question: which year does this deduction do the most work for you?
If you have property acquired on or before January 19, 2025 that still isn’t in service, the old clock is still running and it stops at the end of 2026. That one is genuinely time-sensitive.
To work through your specific situation, call the office at (832) 594-0339 or use the contact page. We coordinate tax planning with purchase timing across our small business and real estate clients every quarter.
Common questions
How much bonus depreciation can I take on equipment I buy in 2026?
One hundred percent, if the property was acquired after January 19, 2025. The One Big Beautiful Bill Act restored the full first-year deduction and made it permanent, and it repealed the old rule that property had to be in service before January 1, 2027. Property acquired on or before January 19, 2025 is a different answer. That property stays on the Tax Cuts and Jobs Act phase-down, which is 20% for 2026.
What does acquired mean for the January 19, 2025 test?
It is the contract date, not the delivery date and not the date you started using the asset. The IRS uses the written binding contract rule, so property is not treated as acquired after the date you entered a written binding contract for it. If you are building the asset yourself, the test is when physical work of a significant nature begins. There is a safe harbor: work counts as significant once you have incurred or paid more than 10% of the total cost, excluding land and preliminary planning.
I signed the contract in 2024 but the equipment arrives this year. What rate do I get?
Twenty percent, and there is a deadline on it. Property acquired on or before January 19, 2025 stays on the old schedule, which is 20% for 2026 and zero after that. It also has to be placed in service before January 1, 2027 to get anything at all. If that equipment is still undelivered, the calendar matters more than usual.
Should I still rush a purchase in before December 31?
Not for the reason you used to. The deduction no longer shrinks if you wait, so pushing a purchase into January moves the deduction rather than costing you it. What year-end still decides is which return the deduction lands on. The better question now is whether the write-off is worth more against this year’s income or next year’s.
Can I choose to take less than 100%?
Yes. Section 168(k)(10) lets you elect 40% instead of 100%, or 60% for certain longer production period property and aircraft, for the first taxable year ending after January 19, 2025. That sounds like giving money away, and often it is. But a full write-off is only worth something if you have income to absorb it. Taking it can push the business into a loss and strand the benefit in a carryforward. The election goes on Form 4562 by the due date of the return including extensions.