Compliance
Compliance Essentials: Understanding U.S. Depreciation Deductions Under the OBBBA
Under the One, Big, Beautiful Bill, U.S. businesses should adjust their depreciation strategies to benefit from permanent 100% first-year write-offs for qualified property.
By NomadicTax Research Team • 5-8 min read • February 20, 2026
“When the tax law changes, how you depreciate business assets can mean big dollar differences,” and with the OBBBA, it sure does.
## What Changed with Depreciation
The One, Big, Beautiful Bill made significant amendments to section 168(k): taxpayers can now claim a **permanent 100% additional first-year depreciation deduction** for qualified property placed in service after **January 19, 2025**. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
Before, higher write-offs were time-limited; now, for many assets acquired after that date, there’s no phase-out—unless you elect otherwise. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
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## What Counts as Qualified Property?
Qualified property includes tangible depreciable assets used in your business—excluding land—and may extend to certain **qualified sound recording productions** that begin after the cut-off date. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
If you're thinking of elections under §168(k)(5) or (10), or considering less than 100% write-offs with elections, those are now options in some cases. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
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## Actionable Steps for Compliance
- **Review acquisition dates**: Check whether your property was placed in service after January 19, 2025. If yes, full write-off likely available.
- **Consult with your tax advisor**: Some assets may be better depreciated conventionally if bonuses or first-year write-offs push you into higher tax brackets or phase-outs.
- **Document elections**: If you choose reduced percentages or must elect special treatments, maintain records properly.
- **Plan capital investments**: Since the benefit is permanent, accelerating purchases where possible may give higher cash-flow payoff.
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## Example Scenario
A manufacturer buys a machine on **February 1, 2025** (placed in service same month). Because it qualifies, the company can fully expense that machine in year one rather than depreciate over years. If the same machine were acquired before cutoff, bonus depreciation might have phased out to 40%.
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## Risks and Caveats
- **State tax conformity**: Some U.S. states may not follow the federal bonus depreciation rules—check state rules.
- **Alternative Minimum Tax (AMT)**: While many exclusions and deductions interact, depreciation can trigger AMT adjustments.
- **Property type specifics**: Be sure your asset fits into “qualified property.” Buildings generally do not; certain leased equipment and property under construction may have special rules.
With the OBBBA in effect, effective asset capitalization and depreciation strategy are more powerful than ever.