What are the essential rules for 100% bonus depreciation in 2026?
- 100% bonus depreciation is a tax rule that allows real property owners to take a tax deduction equal to 100% of a qualified business property.
- The deduction is upfront, which means you can immediately write off the total cost of equipment, machinery and other qualifying property to dramatically reduce your taxable income this year.
- Work with a tax advisor who specializes in bonus depreciation to conduct a cost segregation study to determine which of your property investments may be eligible for 100% bonus depreciation.
If you’re a property owner or investor looking to reduce your taxable income, you may be eligible to leverage a powerful provision of the tax code called 100% bonus depreciation.
Originally passed as part of the One Big Beautiful Bill (OBBB) Act, which was signed into law on July 4, 2025, 100% bonus depreciation is a recently restored version of a tax rule that allows you to deduct certain qualified property investments upfront rather than over the lifetime of a standard depreciation schedule.
Depending on your specific circumstances, the new rule could have major implications for your taxes or future investment plans. Here’s what you need to know.
What is 100% bonus depreciation?
100% bonus depreciation is a recently reinstated provision of the tax code that allows property owners and real estate investors to claim a tax deduction equal to 100% of the cost of a qualified business property. This can be a useful tool for lowering your business tax obligations in certain situations.
- The tax deduction is upfront, which means it will reduce your tax burden for the year you become eligible for it if you qualify and choose to use it.
- Being able to take 100% of depreciation as an upfront deduction can be a significant tax opportunity because it stands in contrast to typical depreciation schedules, which require owners to slowly deduct depreciation over the service life of the asset.
- 100% bonus depreciation was first introduced under the Tax Cuts and Jobs Act (TCJA) of 2017 and originally applied only to eligible property bought and put into use by December 31, 2022.
- In 2023 and 2024, bonus depreciation decreased by 20% annually. Pre-OBBB, it had been scheduled to continue doing so until it ended completely in 2027.
How did 100% bonus depreciation rules change in 2025?
In 2025, the OBBB brought back 100% bonus depreciation, starting for that tax year. It also made the provision a permanent part of the tax code.
- Qualified property acquired and placed into service after January 19, 2025, may now be eligible for 100% bonus depreciation.
- The goal of reinstating bonus depreciation is to incentivize investment in real estate, equipment and other assets, with the intent of boosting the economy and driving growth.
- Because the provision is now permanent, it provides long-term tax planning opportunities and greater certainty for businesses around that tax planning.
What is the depreciation limit for 2026?
In 2026, you are eligible to take a tax deduction worth up to 100% of the cost of qualified property. This allows you to claim the full deduction upfront rather than following a standard, decades-long depreciation schedule, which requires you to spread the deduction of those costs out over the full length of the schedule.
What qualifies for 100% bonus depreciation?
If you’re acquiring (or have recently acquired) property for business or income-generating purposes, you may qualify for 100% bonus depreciation. To determine what’s eligible and how to best reduce your tax burden, consider conducting a cost segregation study.
- With the return of 100% bonus depreciation in 2025, you have a valuable opportunity to significantly reduce your taxable income by fully expensing the cost of eligible assets in the year they’re placed in service.
- The reinstated provision allows you to make immediate write-offs of investments, such as equipment, machinery, technology and certain vehicles, which can dramatically improve cash flow and reduce tax liability.
- You should strongly consider performing a cost segregation study to help take better advantage of bonus depreciation. A cost segregation study breaks down the components of a building into shorter-lived assets that can qualify for accelerated depreciation, including bonus depreciation.
- Cost segregation allows you to reclassify portions of the property from the standard 39-year (commercial) or 27.5-year (residential) depreciation schedule to five-, seven-, or 15-year categories, which are eligible for 100% bonus depreciation under the current rules.
- You may also want to analyze whether or not bonus depreciation makes sense or if you should elect to take 40% depreciation instead to offset higher income in future years.
How can you take advantage of 100% bonus depreciation?
If you invest in real estate or otherwise own other qualified property, you may be eligible for significant tax benefits that stem from 100% bonus depreciation. Here are three essential next steps to take:
- To understand your options, consult your tax advisor on the full implications of bonus depreciation and the rest of the tax changes under the OBBB.
- Get help conducting a cost segregation study so you can more effectively maximize your tax advantages by determining the full extent to which your assets may qualify for bonus depreciation.
- Consider how bonus depreciation fits into your overall business and tax strategy. In some cases, being able to take 100% depreciation upfront may incentivize you to prioritize investments that qualify for a bigger deduction.
How Wipfli can help
We make your tax strategy smarter so you can stop leaving money on the table. Let’s talk about how we can help you leverage tax law to reduce your taxable income, do cost segregation studies, claim incentives and more. Start a conversation.
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