For qualifying property acquired after 19 January 2025, bonus depreciation is 100% and permanent. Property acquired on or before that date, including under a binding contract signed earlier, stays on the old phase-down: 40% if placed in service in 2025, 20% in 2026.
The rate follows the acquisition date.
Public Law 119-21, section 70301, amended section 168(k) to allow a permanent 100% additional first-year depreciation deduction for qualified property acquired after 19 January 2025. Property acquired on or before that date stays on the phase-down that the Tax Cuts and Jobs Act wrote into section 168(k)(6): 40% if placed in service in 2025, 20% if placed in service in 2026, and nothing after (60% and 40% for property with a long production period and certain aircraft). The placed-in-service date decides which year's return the deduction goes on; the acquisition date decides the rate.
For property bought under a written binding contract, the acquisition date is the later of the date the contract was entered into, the date it became enforceable under state law, the end of any cancellation period, and the satisfaction of any contingency clause (Treasury Regulation 1.168(k)-2(b)(5), carried forward by Notice 2026-11). A written binding contract is one enforceable under state law that does not limit damages to a specified amount. For property the taxpayer builds, the acquisition date is when manufacturing, construction or production begins. A contract signed in December 2024 for a machine delivered in 2026 is a 20% asset, however new the machine.
| Asset | Acquired | Placed in service | Cost | Rate | Bonus | MACRS, year 1 (7-year, half-year, 14.29%) | First-year total |
|---|---|---|---|---|---|---|---|
| Press, written binding contract signed 10 January 2025 | 10 Jan 2025 | Mar 2025 | 100,000.00 | 40% | 40,000.00 | 8,574.00 | 48,574.00 |
| Conveyor, purchase order accepted 3 March 2025 | 3 Mar 2025 | Nov 2025 | 100,000.00 | 100% | 100,000.00 | 0.00 | 100,000.00 |
| Compressor, contract signed 2 December 2024 | 2 Dec 2024 | Feb 2026 | 100,000.00 | 20% | 20,000.00 | 11,432.00 | 31,432.00 |
A transition election lets a taxpayer take 40% instead of 100% for its first year ending after 19 January 2025.
Section 168(k)(10), as amended, allows an election to deduct 40% (60% for long-production property and certain aircraft) instead of 100% for qualified property placed in service during the first taxable year ending after 19 January 2025. For a calendar-year taxpayer that is 2025. Notice 2026-11, section 4, describes how the election is made on a timely filed return. It differs from the elect-out under section 168(k)(7), which is made class by class for a year and takes the class to regular MACRS: the transition election applies to the qualified property placed in service in that year and keeps the phase-down rate. A taxpayer near a loss, or in a state that adds bonus back, may prefer either.
| Asset | Description | Class | Location | In service | Cost | NBV, federal | Status |
|---|---|---|---|---|---|---|---|
| 10120 | Nonresidential improvement, Bldg 2 | Buildings and improvements | Plant 1 | 06/2019 | 312,000.00 | 251,662.32 | In service |
| 10412 | Vertical machining center | Machinery and equipment | Plant 1 / Cell 4 | 05/2023 | 148,500.00 | 46,391.40 | In service |
| 10577 | Delivery van, unit 7 | Vehicles | Fleet | 09/2024 | 58,900.00 | 16,963.20 | In service |
| 10603 | Warehouse racking, aisle 3 | Furniture and fixtures | Warehouse | 01/2025 | 24,300.00 | 14,876.46 | In service |
| 10688 | Server cluster | Computer equipment | HQ / IT | 03/2026 | 41,200.00 | 0.00 | In service |
| 10701 | Line 2 conveyor upgrade | CIP | Plant 2 | 86,410.00 | 86,410.00 | In progress | |
| 09877 | Forklift, unit 3 | Machinery and equipment | Warehouse | 04/2018 | 31,750.00 | 0.00 | Fully depreciated |
What did not change.
Used property qualifies if the taxpayer did not use it before and acquired it from an unrelated party. Qualified improvement property, at 15 years, qualifies. Property with a recovery period over 20 years does not, which is why buildings take section 168(n) (qualified production property) or nothing. The elect-out by class and year remains, and so does the interaction with section 179: section 179 applies first and reduces basis; bonus applies to what is left; MACRS applies to the remainder. The section 179 article covers the limits, the mid-quarter article the convention, and the tax-update changelog the dates the software applied each change.
What to record on the asset.
- The acquisition date and the placed-in-service date, as two fields; for a binding contract, the contract date and the dates of enforceability, cancellation periods and contingencies.
- Whether the asset is new to the taxpayer and acquired from an unrelated party.
- The class, so that an elect-out under section 168(k)(7) can be applied to it for the year.
- The transition election under section 168(k)(10) for the taxable year, if made.
- The state treatment in each state book, since many states add bonus back.
In Fixed Asset Desk: the bonus rate is chosen from the acquisition date on the asset, with the placed-in-service date used only for the year; the change was applied in the 2025 tax-table update and is dated in the changelog.
Sources: Public Law 119-21 (4 July 2025), section 70301; Internal Revenue Code section 168(k); Notice 2026-11 (interim guidance on the additional first-year depreciation deduction); Treasury Regulation 1.168(k)-2; Instructions for Form 4562 (2025); Publication 946 (2025). Checked 20 September 2026.