Is 100% Bonus Depreciation Really Back for Good in 2026?

If you've been planning around the old phase-down schedule — 80% in 2023, 60% in 2024, 40% in 2025, headed to zero by 2027 — you can stop. That schedule is gone. The One Big Beautiful Bill Act (OBBBA) restored bonus depreciation to 100% and made it permanent law, not a temporary provision with a sunset date attached. For business owners who put off an equipment purchase or a cost segregation study waiting to see what Congress would do, the uncertainty is resolved.

That doesn't mean every dollar of new property is now instantly deductible, or that the rules are as simple as "buy it, write it off." Here's what actually changed, what qualifies, and where owners still get this wrong.

What changed

Bonus depreciation has existed in some form since 2001, but the 2017 Tax Cuts and Jobs Act pushed it to 100% starting in 2018 — with a built-in phase-down beginning in 2023. Under that schedule, the percentage dropped every year until it disappeared entirely for property placed in service in 2027 and later.

OBBBA reset that clock. Qualified property acquired and placed in service after January 19, 2025 is back to 100%, and — unlike the 2017 law — there's no scheduled phase-down this time. Barring future legislation, this is the new baseline, not a temporary window to plan around.

What actually qualifies

Bonus depreciation applies to tangible property with a MACRS recovery period of 20 years or less — think equipment, machinery, vehicles, furniture, and off-the-shelf software. It also applies to qualified improvement property: interior improvements to nonresidential real property (not the building's structure, roof, or exterior, and not expansions or elevators).

Both new and used property generally qualify, as long as you acquired it in an arm's-length purchase — not from a related party, and not through a like-kind exchange where the old asset's basis carries over. The property also has to be new to you; it doesn't need to be brand new off the factory floor.

What bonus depreciation does not reach on its own is the building itself. Residential rental property (27.5-year life) and most nonresidential real property (39-year life) sit outside the 20-year window and don't qualify for bonus depreciation as filed on a standard return.

Where cost segregation fits in

This is the piece most owners miss: 100% bonus depreciation makes a cost segregation study more valuable, not less. A cost segregation study is what identifies which components of a building — wiring, certain flooring, site improvements, specialty plumbing — actually belong in a shorter recovery class instead of the building's default 27.5- or 39-year schedule. Without that study, most of a building's cost sits in a bucket that doesn't qualify for bonus depreciation at all, no matter what the rate is. With it, a meaningful share of the purchase price can move into 5-, 7-, and 15-year property — and now gets expensed at 100% in year one.

The catch: your state may not follow along

The other catch: it's automatic, which isn't always what you want

Bonus depreciation applies automatically by asset class unless you affirmatively elect out. That's usually a good thing, but not always. If a business is in a low-income year, throwing every eligible dollar into a 100% first-year deduction can create — or waste — a loss that doesn't help much, when spreading that same deduction over a few years might offset income more evenly. This is exactly the kind of decision that belongs in a written plan built around your actual numbers, not a default election made without discussion.

It also isn't automatically the better choice over Section 179, which lets you target specific assets and has its own tradeoffs around state conformity and the business-income limitation. We'll walk through how to sequence the two in a future article.

The takeaway

100% bonus depreciation being permanent is genuinely good news for business owners who invest in equipment, vehicles, or real estate improvements — it removes the "use it or lose it before the phase-down" pressure that shaped a lot of fourth-quarter purchasing decisions the last few years. But permanent doesn't mean automatic or one-size-fits-all. Whether to take it, when to pair it with a cost segregation study, and how it interacts with your state return and your entity structure are still planning decisions, not just a box to check on the return.