Entity Setup
Maximizing Depreciation with the New Special Allowance for Qualified Production Property
How businesses can leverage the One, Big, Beautiful Bill’s new depreciation rules to write off 100% of qualified production property costs — and the key criteria you need to meet.
By NomadicTax Research Team • 5-8 min read • March 8, 2026
## Understanding the Special Depreciation Allowance (Section 168(k))
Under the **One, Big, Beautiful Bill Act of 2025**, businesses may now elect to take **100% first-year depreciation** on **qualified production property** placed in service after **July 4, 2025**, and before **January 1, 2031**. This allows companies engaged in manufacturing, chemical production, agriculture, or refining to write off the full unadjusted depreciable basis of eligible assets immediately rather than spreading deductions over years. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-special-depreciation-allowance-for-qualified-production-property-announce-upcoming-proposed-regulations-under-the-one-big-beautiful-bill?utm_source=openai))
## What Counts as Qualified Production Property and Activity
You’ll need to meet specific criteria:
- Property must be **nonresidential real property** used as an **integral part** of a qualified production activity (e.g., a plant facility).
- The production activity must involve **substantial transformation** of inputs into a qualified product. Simple resale or distribution won’t qualify. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-special-depreciation-allowance-for-qualified-production-property-announce-upcoming-proposed-regulations-under-the-one-big-beautiful-bill?utm_source=openai))
## How and When to Elect the Allowance
- The election must be made in the year the property is placed in service.
- Be sure to maintain **good records** documenting when the property was placed in service, its use, and its depreciation basis.
- The allowance applies only during the **limited period** the law is in effect: from mid-2025 through the end of 2030. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-special-depreciation-allowance-for-qualified-production-property-announce-upcoming-proposed-regulations-under-the-one-big-beautiful-bill?utm_source=openai))
## Practical Examples
- **Example A**: A farmer installs a new processing line in a facility on **August 1, 2025** — unadjusted basis $1,000,000. Since service is placed within the eligible window and activity qualifies, the full $1,000,000 can be depreciated in **2025**.
- **Example B**: A refinery purchases machinery in **June 2025** but doesn’t **place it in service** until March 2026. Even though the purchase was earlier, the 100% depreciation applies based on **placed-in-service date** being within the eligible period. Meanwhile, for property placed **after December 31, 2030**, the full depreciation won’t be available. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-special-depreciation-allowance-for-qualified-production-property-announce-upcoming-proposed-regulations-under-the-one-big-beautiful-bill?utm_source=openai))
## Actionable Steps for Businesses
- **Audit existing assets** to identify whether any qualify for treatment under these rules.
- **Time asset purchases and installations** to occur between **July 4, 2025** and **December 31, 2030**.
- Work with tax advisors to ensure elections are properly made and depreciation recapture risk is managed, especially if an asset later ceases to qualify.
- If needed, **comment on proposed regulations** — Treasury and IRS invited feedback in Notice 2026-16. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-special-depreciation-allowance-for-qualified-production-property-announce-upcoming-proposed-regulations-under-the-one-big-beautiful-bill?utm_source=openai))
Taking advantage of this accelerated depreciation can deliver significant cash flow benefits — allowing reinvestment into core business operations — but must be done with compliance and planning in mind.