Entity Setup
Depreciation Reboot: Taking Advantage of the 100% First-Year Deduction Under the OBBB
The One, Big, Beautiful Bill introduced a permanent 100% first-year depreciation deduction for qualifying property—learn how to identify eligible assets and optimize elections.
By NomadicTax Research Team • 5-8 min read • June 18, 2026
## What Is the New 100% First-Year Depreciation Deduction?
Prior to OBBB, under the Tax Cuts and Jobs Act (TCJA), a bonus depreciation schedule phased down from 2023 to 2025. The OBBB permanently restores **100% additional first-year depreciation** effective for property acquired after **January 19, 2025**. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
## Who and What Qualifies
Eligible property includes:
- Depreciable business property placed in service after Jan. 19, 2025;
- Specified plants planted or grafted after that date under § 168(k)(5);
- Components of larger self-constructed property acquired after that date;
- **Qualified sound recording productions**, with principal recording commenced and service placed after July 4, 2025. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
Taxpayers also have options to elect otherwise: for example, electing a 40% first-year deduction for certain property if needed. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill?utm_source=openai))
## Election Mechanics and Strategic Considerations
- **Make the election** explicitly if opting out of full 100% deduction for certain property—you may prefer lower immediate deduction if it aligns better with your tax profile.
- **Timing matters**: election timelines are tied to property being acquired after Jan. 19, 2025, or, for sound recordings, commencing in tax years ending after July 4, 2025.
- **Service date definition**: qualified sound recordings are “placed in service” at initial release or broadcast. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
## Practical Examples
- *Example 1*: A manufacturer buys new machinery on February 2025 and places it in service in August 2025. It qualifies for 100% bonus depreciation, so the entire cost can be deducted in the first year rather than spread over several years.
- *Example 2*: A music label begins principal recording on a sound recording project in September 2025 and releases it in March 2026. That project qualifies as sound-recording property eligible for first-year depreciation.
## Action Steps for Businesses
- Inventory all assets acquired or plants or sound recording productions commenced after the qualifying dates—capture acquisition and service dates precisely.
- Review your tax strategy: if profits are high this year, front-loading deductions could lower taxable income significantly. If expecting loss or low profits, sometimes delaying or allocating depreciation differently through election may help.
- For self-constructed assets, ensure components and phases are clearly identified, and retain documentation to establish acquisition dates.
**Bottom line**: The permanent 100% first-year depreciation deduction is now law. If you acquire qualifying property after Jan. 19, 2025—or undertake a sound recording project after July 4—use this powerful deduction to unlock tax savings in the first year rather than waiting.