Tax Planning
Tax Planning Under the One, Big, Beautiful Bill: Unlocking the 100% First-Year Depreciation Opportunity
Businesses acquiring qualifying property after January 19, 2025 under the One, Big, Beautiful Bill (OBBB) can now deduct **100% of the cost in the first year**, drastically altering asset recovery strategies.
By NomadicTax Research Team • 6 min read • March 23, 2026
## What’s New with § 168(k) Depreciation
The One, Big, Beautiful Bill (OBBB), passed July 4, 2025, amended Internal Revenue Code § 168(k) via § 70301 to make the **100% additional first-year depreciation deduction** permanent for qualified property acquired and placed in service after **January 19, 2025**. That includes specified plants planted or grafted after that date. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
During a transition period, however, businesses may *opt out* and instead deduct 40% (or 60% for certain property with longer production periods or aircraft). ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
## Who Benefits Most?
- Manufacturers buying heavy equipment, machinery, or production line components
- Farms or nurseries planting or grafting specified plants
- Businesses acquiring aircraft or other long-production period property who want to time electrification, replacement, or expansion projects to optimize tax benefits
## Strategic Planning Tips
1. **Time acquisitions carefully.** For property placed in service **after January 19, 2025**, full 100% depreciation applies. If you’re acquiring property in late 2025 or 2026 anyway, locking in before year end may not matter for § 168(k), but for certain information reporting and elections, timing and record-keeping are still key. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
2. **Know the election option.** The law allows an election to deduct *less than 100%*—40% (or 60% for special property) instead—if for example, you anticipate issues like depreciation recapture or want smoother earnings. Use elections under § 168(k)(5) and § 168(k)(10). ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
3. **Ensure proper documentation.** Maintain acquisition date, place-in-service date, production period details, and correctness of classification under “qualified property” or “specified plants.” It will be essential for audit compliance.
4. **Watch for final regulations.** Interim guidance is in place via Notice 2026-11, but final regulations are forthcoming. Taxpayers may rely on the interim guidance for property placed in service before the date the final rules are published. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
## Example Scenario
- **Business A** buys $1,000,000 worth of machinery on February 1, 2026, meets all “qualified property” test—places it in service same month. Under OBBB § 168(k), it deducts **$1,000,000 in year one** (100%). Without OBBB, it may have been subject to phased‐own 40%-60%. With recapture risk low (no change in use, no sale within short period), this is often a major cash-flow benefit.
- **Business B** invests in a sound recording project (a qualified sound recording production) commencing in its taxable year ending after January 19, 2025. Under interim guidance, it qualifies under modified § 168(k)(2) to be “qualified property” and can take full first-year depreciation. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
## Key Takeaways
- This change under the OBBB law is **permanent** and substantially improves cost recovery timing for many capital investments.
- Businesses should analyze upcoming purchases to maximize timing and take advantage of 100% deduction.
- Keep an eye on final regulations—but make good use of the interim guidance now.
By proactively incorporating these depreciation changes into investment decisions, businesses can accelerate tax savings, improve cash flows, and support growth under the new law.