Bonus depreciation 2026 is back to 100%. After years of phase-downs that left business owners scrambling, the One Big Beautiful Bill restored full first-year expensing for qualifying assets. If you buy equipment, vehicles, or invest in property improvements this year, you can deduct the entire cost in year one.
This is the single most impactful change in the tax code for capital-intensive businesses. Here's what it means, what qualifies, and how to time your purchases for maximum savings.
The Phase-Down That Almost Killed Bonus Depreciation
Under the Tax Cuts and Jobs Act of 2017, businesses got 100% bonus depreciation on qualifying assets placed in service between September 27, 2017 and December 31, 2022. After that, the deduction was scheduled to phase down by 20% per year:
That phase-down created real problems. Businesses that needed to buy equipment in 2024 or 2025 faced significantly reduced deductions. The restoration means the full write-off is available again — retroactive to January 20, 2025 per the bill's provisions.
What Qualifies for 100% Bonus Depreciation
Bonus depreciation applies to tangible property with a MACRS recovery period of 20 years or less. That includes a broad range of business assets:
- Equipment and machinery — manufacturing equipment, computers, office furniture
- Vehicles over 6,000 lbs GVWR — heavy SUVs, trucks, and vans (see our Section 179 vehicle guide)
- Qualified improvement property (QIP) — interior improvements to nonresidential buildings
- Cost segregation components — building elements reclassified into 5, 7, or 15-year categories
- Software — off-the-shelf and certain internally developed software
- Land improvements — parking lots, landscaping, fencing, sidewalks
Key detail: The asset must be new to the taxpayer, not necessarily brand new. Used assets qualify for bonus depreciation as long as you haven't previously used them and they weren't acquired from a related party.
Bonus Depreciation vs. Section 179: How They Work Together
Business owners often confuse these two provisions. They're complementary, not competing. Section 179 has a $1.25 million deduction cap and requires the business to have taxable income. Bonus depreciation has no cap and can create a net operating loss.
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| Deduction limit | $1.25M (2026) | No limit |
| Can create a loss? | No — limited to taxable income | Yes — can create NOL |
| Used property? | Yes | Yes (new to taxpayer) |
| Phase-out | Begins at $3.13M in purchases | None |
| Real property? | Limited (QIP, roofs, HVAC) | QIP and cost seg components |
The smart play: Use Section 179 first on assets you'd like to target specifically, then let bonus depreciation sweep up the rest. This is especially powerful when combined with a cost segregation study on commercial property.
Cost Segregation + Bonus Depreciation: The Multiplier Effect
This is where the real savings stack up. A cost segregation study reclassifies building components — electrical, plumbing, flooring, site work — from 39-year property into 5, 7, and 15-year categories. With 100% bonus depreciation restored, every dollar reclassified is fully deductible in year one.
For a $2 million commercial property, a typical cost segregation study might reclassify 25-35% of the building's value. At 100% bonus depreciation, that's a $500,000–$700,000 first-year deduction that would have taken decades to realize through straight-line depreciation.
Own commercial property or planning a purchase? A cost segregation study paired with 100% bonus depreciation could unlock six-figure deductions in year one.
See If You Qualify for a Free Study →Strategic Timing: When to Buy in 2026
With 100% bonus depreciation, the key rule is simple: the asset must be placed in service before December 31, 2026. "Placed in service" means ready and available for use — not just purchased or ordered.
Here's the strategic calculus:
- High-income year? Accelerate purchases to offset taxable income now
- Lower-income year ahead? The deduction can create a net operating loss that carries forward
- Large property acquisition planned? Commission a cost segregation study before closing to maximize the first-year deduction
- Q4 is critical — most proactive tax planning happens October through December
Don't wait until December. Equipment lead times, cost segregation studies, and entity structuring all take time. The best year-end moves are planned in Q3. Talk to your tax strategist — not just your CPA — before November.
What Doesn't Qualify
Not everything gets the 100% treatment. These are excluded from bonus depreciation:
- Land — never depreciable
- Residential rental property structures — 27.5-year property (though cost seg components within them qualify)
- Nonresidential real property structures — 39-year property (same caveat for cost seg)
- Property with a recovery period over 20 years
- Property used outside the U.S.
- Certain regulated utility property
The Bottom Line
The restoration of 100% bonus depreciation in 2026 is a significant win for business owners who invest in equipment, vehicles, and property. Paired with Section 179 and cost segregation, it creates a powerful deduction toolkit that can dramatically reduce your tax liability in a single year.
The businesses that benefit most are the ones that plan ahead. If you're considering a major purchase or property investment this year, the math has never been more favorable.
Want to see how bonus depreciation, Section 179, and cost segregation apply to your specific situation?
Book a Free Tax Strategy Review →