The Treasury Department and the IRS issued interim guidance Wednesday on the permanent 100% additional first-year depreciation deduction for eligible depreciable property acquired and placed in service after Jan. 19, 2025, provided by the One Big Beautiful Bill Act.
Notice 2026-11 also provides guidance on certain qualified sound recording productions that the OBBBA added as property that could be eligible for the additional first-year depreciation deduction.
Generally, when taxpayers acquire property for business use, they must depreciate it over several years based on various depreciation schedules.
Notice 2026-11 provides rules for determining whether depreciable property is eligible for the additional first-year depreciation deduction under Section 168(k) of the tax code and for determining the amount of such deduction allowable under the OBBBA.
In general, the Trump tax law provides a permanent 100% additional first-year depreciation deduction for qualified property acquired, or specified plants that are planted or grafted by farmers, such as fruits, nuts, and vines as part of their everyday farming activity, after Jan. 19, 2025.
A farming business has to make this election each year to claim bonus depreciation for the specified plants planted or grafted that year, instead of claiming bonus depreciation in the year the specified plant is placed in service.
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The notice also provides interim guidance on elections taxpayers can make for certain property to be eligible for the additional first-year depreciation deduction. Under the OBBBA, taxpayers may elect:
- To deduct 40% (60% for certain property having longer production periods or certain aircraft) instead of the 100% additional first-year depreciation deduction for qualified property placed in service during the first tax year ending after Jan. 19, 2025;
- To deduct additional first-year depreciation for one or more specified plants;
- To treat certain acquired or self-constructed components of larger self-constructed property as generally eligible for the additional first-year depreciation deduction; and
- Not to deduct the additional first-year depreciation for a qualified sound recording production.
Sound recording productions added by the OBBBA
In addition, Notice 2026-11 provides interim guidance for qualified sound recording productions. In general, a qualified sound recording production:
- Is treated as acquired on the date principal recording commences;
- Is considered placed in service at the time of initial release or broadcast; and
- Qualifies for the additional first-year depreciation deduction if the sound recording production commences in a taxable year ending after July 4, 2025.
“The interim guidance provides welcome certainty to developers and investors seeking to confirm that property qualifies for the new bonus depreciation allowance,” law firm Stoel Rives said in a blog post. “The 2017 Regulations [under the Tax Cuts and Jobs Act] are complex and contain some ambiguity, but the interim guidance will at least allow developers and investors to have comfort that they can rely on similar principles for purposes of determining whether qualified property will be considered acquired after January 19, 2025 so that it may qualify for the new OBBBA bonus depreciation regime.”
Photo credit: Douglas Rissing/iStock
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