Tax Planning

Maximizing Depreciation Deductions Under the One, Big, Beautiful Bill

Understanding how the permanent 100% first-year depreciation option under the OBBB can save businesses big, with examples of eligible property and elections.

By NomadicTax Research Team • 5-8 min read • February 27, 2026

## What’s New With Depreciation Under OBBB The One, Big, Beautiful Bill (OBBB) permanently **amends Section 168(k)** to allow a **100% additional first-year depreciation deduction** for qualified depreciable property acquired **after January 19, 2025**. That means, instead of spreading out deductions over multiple years, businesses can often write off the entire expense in the year the property is placed in service.([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)) Interim guidance from IRS Notice 2026-11 clarifies eligibility rules, offers optional elections if you don’t want the full 100%, and includes **sound recording productions** among eligible property.([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)) ## Eligibility: What Qualifies as “Qualified Property”? You’ll want to check if your asset meets the criteria. Here are the basics: - Must be depreciable property—that includes equipment, machinery, and certain other business-use assets.([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)) - Acquired or placed in service **after January 19, 2025**. For certain types of property (like long-production property or aircraft), there may be additional placement deadlines under prior law; OBBB removed many of those restrictions.([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai)) - Specified plants planted or grafted after the same date may also qualify.([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)) - Sound recording productions with key dates after July 4, 2025, are considered acquired as of when recording starts, and placed in service upon release or broadcast.([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)) ## Elections and Options If full deduction isn’t ideal, you have some choices: - Elect **40% deduction** for property placed in service during your taxable year that includes January 20, 2025 (or **60%** for certain property like those with long production periods or aircraft).([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai)) - For specified plants, elect to include them under the provision to get the immediate depreciation benefit.([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)) - Alternatively, you can **opt out** entirely for particular property—attach a statement to your return per IRS rules. This may make sense if your business expects to be in a lower tax rate later years.([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai)) ## Actionable Steps & Examples Use these steps to take advantage: 1. Inventory business assets acquired since **Jan. 20, 2025**—machines, equipment, plants, even sound recordings. Mark by acquisition date and use-date. 2. For each, determine whether full 100% depreciation works or an election for reduced amounts (40%/60%) is more strategic (think about your current tax rate vs future forecasts). 3. If electing out or choosing a percentage election, attach required statements to your timely return (including extension). 4. Coordinate with financial planning—accelerating depreciation will reduce taxable income now but may impact carryforwards, tax basis, and recapture later. ### Example 1: Manufacturing Business Suppose you acquire a new CNC machine on March 1, 2025, start using it that July. It qualifies as “qualified property.” Opting for 100% depreciation means your business deducts the full cost in 2025, shrinking taxable income substantially. If instead you believe tax rates will drop next year, you could elect 40% for 2025 and allocate the rest over future years. ### Example 2: Sound Recording Production A producer begins recording a “qualified sound recording” piece on August 1, 2025. Under OBBB, acquisition date = recording commencement, placed in service when released. The entire production cost may be 100% depreciable in the year of service if placed in service after requirement dates.([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)) ## Pitfalls to Watch Out For - **Recapture**: If property stops being eligible (e.g., use changes), depreciation deductions might be partially recaptured as ordinary income. - **Election timing**: Deadlines matter—some elections should be made with timely returns (including extensions). Missing deadlines can lock you into less favorable treatment. - **Interplay with state tax law**: Not all states conform to OBBB; state depreciation rules may differ. Always align both federal and state returns.