Bonus Depreciation in 2026
Current federal rules, eligible property, placed-in-service timing, vehicle limits, cost segregation, state conformity, and recapture.
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Written by Bryan Martin, CPA, Managing Partner and Founder of Taxstra. Last updated July 10, 2026.
100% Bonus Depreciation
The current federal rule and why it no longer phases down
For 2026, this page uses a federal bonus-depreciation rate of 100% for qualifying property acquired after January 19, 2025 and placed in service under the applicable rules.
The One Big Beautiful Bill Act, signed July 4, 2025, made the 100% allowance permanent. Unlike the prior law that stepped the rate down each year, there is no scheduled phase-out for qualified property acquired and placed in service after January 19, 2025. Property tied to a binding written contract dated on or before that date generally stays on the old phase-down schedule.
The percentage alone does not determine the deduction. Property type, acquisition date, binding-contract history, placed-in-service date, business use, elections, basis, and loss limitations all require review.
Review IRS Publication 946Bonus Depreciation Percentage by Year
| Property period | Federal rate | Planning note |
|---|---|---|
| 2022 | 100% | Prior-law full allowance |
| 2023 | 80% | Prior-law phase-down |
| 2024 | 60% | Prior-law phase-down |
| Early 2025 transition property | 40% | Separate transition rules may apply |
| Qualified property acquired after January 19, 2025 | 100% | Permanent under current law; used for the 2026 examples below |
Which Property Is Eligible?
| Property | General treatment | Issue to review |
|---|---|---|
| MACRS property with a recovery period of 20 years or less | Potentially eligible | Confirm class life and exclusions |
| Certain computer software | Potentially eligible | Confirm Section 167 treatment |
| Qualified film, television, live theatrical, and sound-recording productions | Potentially eligible | Special definitions and dates apply |
| Certain used property | Potentially eligible | Acquisition and prior-use tests apply |
| Land | Not eligible | Land is not depreciable |
| Building structure with a longer recovery period | Not directly eligible | Cost segregation may identify shorter-lived components |
New Property
New qualifying property may be eligible when the acquisition, placed-in-service, business-use, and statutory requirements are satisfied.
Used Property
Certain used property may qualify, but prior ownership, prior use, related-party, and acquisition rules must be checked. “New to you” is a useful shorthand, not the complete test.
Placed-in-Service Decision Tree
- STEP 1
Was the property acquired under the current-law date rules?
Review purchase date and any binding written contract.
- STEP 2
Is the property complete, ready, and available for its business use?
Payment or delivery alone may not establish placed-in-service status.
- STEP 3
Is the property in an eligible class?
Confirm recovery period, exclusions, and special definitions.
- STEP 4
Do elections or limitations change the result?
Review election-out treatment, business use, basis, and loss limitations.
Vehicle Limitations
Vehicle deductions depend on vehicle classification, business-use percentage, listed-property substantiation, luxury-auto limits, acquisition and placed-in-service dates, and recapture exposure if business use later drops. GVWR alone does not establish a full deduction.
Heavy Vehicles Over 6,000 Pounds
Trucks, vans, and SUVs with a gross vehicle weight rating above 6,000 pounds generally sit outside the luxury-auto dollar caps, so the business-use portion may be eligible for full bonus depreciation rather than a capped annual amount. Business-use, substantiation, and recapture rules still apply.
See the vehicles over 6,000 pounds guideCost Segregation Example
Hypothetical building allocation
Assume an engineering study identifies $200,000 of otherwise eligible shorter-lived components. At the configured 100% rate, the potential first-year bonus amount on those components is $200,000 before other limitations.
What the example does not prove
It does not establish the allocation, eligibility, placed-in-service date, current deductibility, state treatment, or after-tax value for a real property.
Read the cost segregation guideSection 179 vs. Bonus Depreciation
| Issue | Bonus depreciation | Section 179 |
|---|---|---|
| Selection | Generally applies by qualifying property class unless elected out | Generally elected asset by asset |
| Stacking order | Taken second, on the basis remaining after any Section 179 deduction | Taken first against the cost of the asset |
| Income limitation | No taxable-income limit; can create or increase a loss, subject to basis and loss-limitation rules | Limited to taxable business income; the disallowed amount carries forward |
| Annual dollar limit | No overall dollar cap | $2,560,000 limit for 2026; phase-out begins above $4,090,000 of purchases |
| Heavy SUV cap | No SUV-specific dollar cap for qualifying vehicles above 6,000 lbs GVWR | SUV deduction capped at $32,000 for 2026 |
| State treatment | Frequently decoupled | May conform differently |
| Planning use | Broad acceleration for eligible classes | Targeted expensing and election control |
State Conformity and Depreciation Recapture
State-Conformity Warning
States may decouple from the federal allowance, require an addback, or permit a different recovery schedule. Model each filing state separately.
Recapture and Future Sale
Accelerated depreciation reduces adjusted basis and can change the character and timing of gain on disposition. Model the exit before treating the current deduction as permanent savings.
Hypothetical Calculation
| Asset cost | $120,000 |
|---|---|
| Documented business use | 80% |
| Eligible business-use basis | $96,000 |
| Configured federal rate | 100% |
| Potential federal bonus amount before limitations | $96,000 |
Frequently Asked Questions
Model the Deduction and the Exit
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