Tax Planning
Maximizing the Special Depreciation Allowance under the One, Big, Beautiful Bill for US Businesses
Businesses can write off 100% of qualified production property immediately—learn how to identify qualifying assets and make the election before changes kick in.
By NomadicTax Research Team • 5-8 min read • March 9, 2026
## What Is the Special Depreciation Allowance?
Thanks to the **One, Big, Beautiful Bill Act** (OBBB) passed on July 4, 2025, the tax code allows businesses to **elect to deduct up to 100%** of the unadjusted depreciable basis of **qualified production property** placed in service during a taxable year. ([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))
Qualified production property generally includes **nonresidential real property** that’s integral to certain qualified production activities—manufacturing, agriculture, refining, and chemical production. ([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)) It applies only to property placed in service after July 4, 2025, and before January 1, 2031. ([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))
## Who Benefits & When to Elect
**Eligible taxpayers** include businesses with qualified production activity. The key dates:
| Event | Effective Period |
|--|--|
| Property placed in service after July 4, 2025 | Eligible for benefit |
| Deadline for requirement ends December 31, 2030 | Final year property must be placed in service |
To elect the special depreciation allowance:
- Declare the election on your tax return for the year you first place the property into service. ([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))
- Keep thorough documentation showing property meets definition of “qualified production property.”
## Practical Example
**Scenario**: ACME Manufacturing buys a new custom machine (nonresidential real property integral to its manufacturing) for \$500,000 and places it in service on August 1, 2025.
- ACME qualifies because: property is nonresidential, used in manufacturing (a qualified production activity), placed in service after July 4, 2025, and before Jan 1, 2031.
- ACME removes depreciation spread: deducts full \$500,000 in year 1 instead of depreciating over its useful life. Huge immediate tax savings.
- If later ACME's property ceases to qualify (e.g., sold, or function changes), depreciation recapture rules apply. ([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))
## Action Steps for Business Owners & Accountants
- **Inventory assets**: Classify what property might qualify (machinery, buildings integral to production, etc.).
- **Assess placed-in-service dates** carefully. Purchases just after July 4, 2025, benefit immediately, but nothing placed after Dec 31, 2030 qualifies.
- **Monitor upcoming regulations**, because proposed regulations are expected—some elements may change. For now, use **Notice 2026-16** interim guidance. ([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))
- **Ensure compliance**: maintains documentation, use the election correctly, parse recapture rules, and coordinate with financial statement classification.
## Pitfalls & Watchouts
- **Misclassification**: property must be integral to qualified production activity.
- **Election timing**: failure to elect properly invalidates the benefit.
- **Recapture** if property loses qualification.
- **Regulation changes**: the guidance is interim; proposed regulations may adjust criteria or definitions.
By tagging eligible assets now and electing properly in upcoming returns, businesses can take full advantage of this depreciation boost, improving cash flow and reducing tax burdens significantly.