Bonus depreciation in 2026: what permanent actually means

Where we are

The 2025 legislation amended section 168(k) to restore 100% additional first-year depreciation permanently for qualified property acquired and placed in service after 19 January 2025. The phase-down that would have taken bonus to 20% in 2026 and zero in 2027 is gone, and no new sunset was written in.

Treasury and the IRS issued interim guidance in Notice 2026-11 in January 2026, largely carrying forward the existing regulatory framework with the new dates substituted.

The dates that still matter

Property placed in service between 1 and 19 January 2025 falls under the pre-amendment 40% rate. Property acquired before 20 January 2025 but placed in service later also needs checking against the acquisition requirement.

There is also an election to apply 40% — or 60% for certain long-production-period property — for property placed in service in the first taxable year ending after 19 January 2025, which some taxpayers used to avoid creating an unusable loss in that year.

What qualifies

MACRS property with a recovery period of 20 years or less, qualified improvement property, land improvements, computer software, certain water utility property, qualified film, television, live theatrical and — new — sound recording productions.

Used property qualifies too, provided you did not previously use it and did not acquire it from a related party or in certain carryover-basis transactions. That is what makes buying an existing building support a bonus-eligible study.

What does not

The building. Residential rental at 27.5 years and nonresidential real property at 39 years both exceed the 20-year ceiling. Real property held by an electing real property trade or business under section 163(j)(7) is required to use ADS and is therefore ineligible.

Electing out is a real decision

Bonus applies automatically unless you elect out by class of property for the year. Reasons to elect out: expiring net operating losses or credits, a loss that would suspend under the passive rules anyway, state non-conformity creating a permanent schedule mismatch, expected higher future rates, or excess business loss limitations under section 461(l).

Why this makes cost segregation more valuable, not less

Some owners concluded that permanent 100% bonus removes urgency. The opposite is closer to true. Bonus only reaches property with a 20-year or shorter life, and a building is not that. The study is the mechanism that creates the eligible basis in the first place.