Entity Setup
Entity Planning: How the 1st-Year Depreciation Deduction Affects Property Acquisitions in 2026
Guidance under the One, Big, Beautiful Bill now allows **100% additional first-year depreciation** for eligible business property acquired after Jan 19, 2025—this article explains qualifying property, timing, and record-keeping to maximize benefits.
By NomadicTax Research Team • 5-8 min read • June 6, 2026
## What’s Changed with First-Year Depreciation
The One, Big, Beautiful Bill (OBBB) permanently expanded the **100% additional first-year depreciation deduction** for eligible depreciable business property acquired after **January 19, 2025**. Notice 2026-11 from the IRS provides guidance on which property qualifies, including newly added **qualified sound recording productions**—a class of content producers. ([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))
## Which Entities Benefit Most?
- **Small and medium businesses** (manufacturing, agriculture, qualified production) buying new equipment or buildings used in business.
- **Creative producers** of sound recordings, music albums, audio content, who now have access to full depreciation instead of waiting for amortization.
- **Startups or tech firms** investing in computer hardware, software, and infrastructure—all may qualify.
## Qualification Criteria & Timing
To be eligible, property must:
- Be **depreciable business property**, placed in service after Jan 19, 2025.
- Meet “qualified property” standards under § 168(k) as amended by OBBB.
- If using qualified sound recording production, ensure it commences in a taxable year ending after July 4, 2025. ([irs.gov](https://www.irs.gov/irb/2026-24_IRB?utm_source=openai))
## Example: Applying It in Practice
- **Business A** buys new machinery for its factory in March 2026—depreciable under existing IRS rules. With the guidance, it can claim 100% of the cost as a deduction in first year—reducing taxable income significantly.
- **Content Producer B** records a sound album in June 2025, releases it in late 2025. Since production commenced after the July 4, 2025 threshold and recording is in U.S., their production may be eligible under the new law.
## Actionable Steps for Entities
1. Audit your planned property acquisitions—ensure eligible property is acquired and placed in service after the cutoff.
2. Maintain proper documentation: dates of purchase, proof of U.S. production for sound recordings, binding contracts, delivery, etc.
3. Coordinate with your tax preparer to reflect the deduction in 2026 filings.
4. Consider the impact on cash flow: immediate deductions may lower tax liability one year, but reduce deductions in future years—plan budgeting accordingly.
5. If buying via lease vs. owning, evaluate which option maximizes deduction benefits.
**Conclusion:** The expanded first-year depreciation under OBBB is a powerful tool for businesses and production entities—structured acquisitions and sound recordkeeping will help maximize benefits while avoiding later disputes.