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Interim Guidance Issued to Implement OBBBA Bonus Depreciation Amendments
The IRS has issued interim guidance in Notice 2026-11 on January 14, 2026, providing interim guidance on the additional first year depreciation deduction (“bonus depreciation”), following the enactment of the One Big Beautiful Bill Act (P.L. 119-21, OBBBA).
The OBBBA makes 100% bonus depreciation permanent for qualified property acquired and placed in service after January 19, 2025.
Notice 2026-11 explains how taxpayers can apply that rule now—before Treasury/IRS issues proposed regulations—and outlines key elections and special rules (including new rules for qualified sound recording productions).
The Permanent 100% Bonus Depreciation Rule (Post–January 19, 2025 Property)
The OBBBA amended the bonus depreciation rules to provide a permanent 100% additional first-year depreciation deduction for qualified property acquired and placed in service after January 19, 2025 (and for certain specified plants planted or grafted after that date), where original use of new or certain used property commences with the taxpayer.
As modified, qualified property generally includes the following types of property:
- tangible property with a MACRS recovery period of 20 years or less,
- certain computer software;
- water utility property;
- certain productions (film/TV/theatrical);
- qualified sound recording productions*; and
- certain trees/vines/fruit-bearing plants may qualify when planted or grafted (with an election).
Acquisition Date and Binding Contracts
For property to qualify for 100% bonus depreciation, it must be acquired after January 19, 2025. The Notice maintains the current regulatory framework while substituting revised implementation dates.
Specifically, to determine whether depreciable property is acquired after January 19, 2025, taxpayers apply rules consistent with existing bonus depreciation regulations (and consolidated return rules, where applicable) by substituting:
• “January 19, 2025” for “September 27, 2017”, and “January 20, 2025” for “September 28, 2017”.
Written Binding Contract Rule
The Notice states that property is considered acquired when a taxpayer enters a written binding contract for its purchase. A written binding contract is one enforceable under state law against the taxpayer without limiting damages to a set amount.
Consistent with that framework, client impacts most commonly arise when capital projects span the effective date—e.g., orders placed or contracts executed before January 20, 2025, but the asset is delivered/installed later.
Self-Constructed Property
For self-constructed projects, the Notice continues to rely on established standards for when construction begins—using either the “physical work of a significant nature” test or the 10% safe harbor. Consistent with current law, self-constructed property meets the acquisition date requirements when the taxpayer begins construction, manufacture, or production of the property.
This is important for real estate development and large capital projects where different components may be started at different times.
Elections and Special Rules
Notice 2026-11 emphasizes that taxpayers have several elections that can materially affect both (i) the amount of immediate deduction and (ii) future depreciation deductions.
Bonus Elections
• Taxpayers may elect to claim a reduced bonus depreciation rate of 40% (or 60% for certain long production period property and aircraft) for property placed in service in the first taxable year ending after January 19, 2025. This election is only available for the first taxable year ending after January 19, 2025.
• Taxpayers may also elect out of bonus depreciation for any class of property, as under prior law.
• These elections must be done on a timely filed tax return with an attached statement.
Therefore, for the first tax year ending after January 19, 2025, a taxpayer has three choices available:
• Taking 100% bonus depreciation;
• Electing 40% bonus depreciation; or
• Electing out of bonus depreciation.
Component Election (Section 3)
The Notice continues to permit taxpayers to elect component depreciation for individual elements within a larger self-constructed project. Eligible components may qualify for the 100% additional first-year depreciation deduction, even if the overall project does not satisfy the acquisition date requirement, provided each component independently meets the applicable criteria. This provision is particularly relevant for extensive projects where certain parts commence early while subsequently added components may still be eligible based on their specific acquisition or production dates. This election is made by attaching a statement to a timely filed return (including extensions).
Election for specified plants (Section 4)
Notice 2026-11 permanently allows taxpayers to elect bonus depreciation under §168(k)(5) for specified plants planted or grafted after January 19, 2025, as part of their regular farming business. This election is made by attaching a statement to a timely filed return (including extensions).
Qualified Sound Recording Productions (Section 5)
Current law allows certain taxpayers to elect to deduct certain aggregate production costs of any qualified film, television or live theatrical production commencing before January 1, 2026, but did not allow a deduction for sound recording productions. The OBBBA expands bonus depreciation eligibility to include qualified sound recording productions commencing in taxable years ending after July 4, 2025.
For these productions:
• A qualified sound recording production is treated as acquired when “principal recording” commences.
• The production is considered placed in service at the time of initial release or broadcast.
Additionally, to qualify for 100% bonus depreciation the production must be produced and recorded in the United States and commence in a tax year ending after July 4, 2025.
In Conclusion
Notice 2026-11 allows taxpayers to rely on the interim rules for eligible property placed in service in taxable years beginning before the forthcoming proposed regulations are published in the Federal Register, provided the taxpayer follows the Notice’s guidance in its entirety for all eligible property placed in service in those taxable years, beginning with the first year of reliance.
Key Takeaways
• The Notice provides welcome certainty that taxpayers may rely on the principles in the existing bonus depreciation rules to apply the OBBBA, including the “written binding contract” rules used to determine whether the acquisition date requirement in the OBBBA is satisfied (an important concern for taxpayers that made significant property additions near the OBBBA cutoff date of Jan. 20, 2025).
• The ability to rely on the interim guidance immediately is good news for taxpayers looking to maximize depreciation deductions in 2025, including those with disallowed interest deductions that may benefit from the depreciation addback under section 163(j) that was restored under the OBBBA.
• The Notice also provides guidance for making certain elections and for the treatment of sound recordings under the OBBBA full expensing provisions, as further discussed below.
• Taxpayers that produce qualified sound recording productions (e.g., music and media industries, podcasters, production studios) will want to promptly evaluate whether and when to implement the favorable new provision permitting them to claim bonus depreciation for these productions, which was previously only available for film, TV and live theater properties.
What to consider :
• Capital expenditure timing. Review of which assets were acquired and placed in service after January 19, 2025, since that timing drives access to the permanent 100% deduction.
• Contracts and construction start dates. For major purchases or construction projects spanning the effective date, evaluate whether acquisition is impacted by written binding contract timing and—where relevant—construction commencement rules.
• Elections strategy. Consider whether to:
o use the transition 40% election in the first affected year, or
o elect out of bonus depreciation by class for the year, or
o evaluate component elections for large self-constructed projects.