Business owners should be aware that the Treasury Department and IRS issued new guidance on additional first-year bonus depreciation for eligible depreciable property. Let’s dive in to this…to get some clarity.
Notice 2026-111 explains how The One Big, Beautiful Bill Act (OBBBA) makes bonus depreciation permanent, allowing businesses to immediately deduct 100% of the cost of qualified property acquired and placed in service after January 19, 2025. Not coincidentally, this means pretty much everything after Inauguration Day last year.
Whether an additional 10%, 30%, 50% or 100%, bonus depreciation is hardly a new concept. According to the Bipartisan Policy Center2, Congress has enacted it as an economic stimulus measure six times since the first instance in 2002. That was in response to the economic shock after the September 11, 2001 terrorist attacks. The Treasury Department’s Office of Tax Analysis stated that “[b]onus depreciation reduces the effective tax rate on investment because it allows firms to deduct capital expenditures more quickly.”3
🧾 The deets…clean and quick
Keep in mind that this is interim guidance. Specific regulations to implement the new tax law are still a work in progress, in an environment where staff has been significantly depleted. Under current law, IRC §168(k)(2)(A) defines “qualified property” for bonus depreciation as property having a recovery period of 20 years or less. Taxpayers may elect to treat certain acquired or self-constructed components of larger self-constructed property as generally eligible for the additional first year depreciation deduction. The idea is companies should be able plan more capital investment and hire more employees if a greater deduction for depreciation expense will lower taxable income.
Manufacturing, building construction and engineering firms of all sizes stand to reap significant tax savings from this guidance to implement §70301 of the OBBBA. Traditionally, i.e., before the enactment of the Tax Cuts and Jobs Act of 2017, these companies would have to capitalize the value of self-constructed sub-components of large-scale physical assets. Depreciation periods for some of these assets would have been as long as 20 years, typically their useful life in normal operating conditions.
💵 WHY does this matter now?
OBBBA §70301(a) removed the placed-in-service date requirements of January 1, 2027 or January 1, 2028 for qualified property. Even so, taxpayers still will need to have their receipts and other paperwork in order. Under existing regulations, additional important considerations are4:
· Acquisition date for self-constructed components
· Beginning date for physical work of a significant nature
· Manufacture, construction or production of component
· Safe harbor for paying more than 10% of costs
· Date of binding written contract
The taxpayer must make a component election for the asset to be eligible for the additional bonus depreciation. The eligible component must also satisfy all the requirements set forth in Treas. Reg. 1.168(k)-2(c), yet to be updated for all of the applicable OBBBA date changes.
🧾 Another type of qualified property to consider: qualified sound recording productions (presumably podcasts)
This past Sunday, the star-studded Golden Globes broadcast in Hollywood had a new award category – Best Podcast6. OBBBA §70434 addresses a matter which will likely be an important issue in the evolving podcast media space.
The Notice 2026-11 interim guidance specifically allows a tax deduction for the cost of any sound recording production up to $150,000, as long as the production commenced before January 1, 2026 and the taxable year ended after July 4, 2025 (the OBBBA enactment date)5. The sound recording asset defined in IRC §181(f) and the copyright law, must be produced and recorded in the United States.
If a qualified sound recording production is acquired, the key factor is the acquisition date. If the qualified sound recording production was acquired after January 20, 2025, it is qualified property eligible for additional first year bonus depreciation. In order to meet the effective date rules for additional depreciation, the acquisition date is considered as the date that principal recording commences. The qualified sound recording production is considered placed-in-service at the time of its initial release or broadcast.
However, if the acquisition date was before January 20, 2025, and production commenced before December 31, 2025, it is not clear whether the additional deduction as a qualified sound recording production would be allowable. That is a specific circumstance you should consult a tax advisor about.
Yet another case of the date making all of the difference. Tax Clarity Newsletter will stay on top of this issue for dates of proposed regulations and Q&A’s that may help untangle more of these details.
💵 Follow-up Dive-in: No-Cost Tax Filing Software. For Some…Not All
The IRS Direct File program was discontinued by the Trump Administration this past November. According to reporting by The Hill, over 300,000 taxpayers used IRS Direct File during filing season last year. However, with the official opening date of 2026 filing season is still eleven days away, some individual taxpayers still have a no-cost option.
Last Tuesday, the IRS announced its Free File program is available right now for taxpayers with adjusted gross income of $89,000 or less7. They will be able to prepare and submit their individual returns through private tax preparation companies in partnership with the federal government. These partners hold the tax returns until electronic filing formally begins on January 26th.
Here is a list of the companies participating:
· 1040Now
· Drake (1040.com)
· ezTaxReturn.com (offers English and Spanish)
· On-Line Taxes
· TaxAct
· TaxHawk (FreeTaxUSA)
· TaxSlayer
You can click here for a separate web page providing access to the IRS trusted partners.
Taxpayers that exceed the $89,000 threshold can access the IRS webpage Free File Fillable Forms. The updated version of this page should be available starting January 26th. This may not be as robust an option as during the brief IRS Direct File era, but the resource is available…and who’s going to scoff when it’s free?
There’s the scoop, everyone! Thanks for taking time to check out the exclusive subscriber edition of the Tax Clarity Newsletter on beehiiv.
Thank you so much!
DISCLAIMER: The information in this newsletter is derived from public information, provided for education purposes. It is not provided as a financial advisory service and should not be relied upon as such. For advice on a specific tax matter, please consult a tax professional.
References (7)
1 Notice 2026-11, Interim Guidance on Additional First Year Depreciation Deduction under 168(k), January 14, 2026, last accessed on January 15, 2026.
2 The 2025 Tax Debate: Cost Recovery Provisions in TCJA, Bipartisan Policy Center, April 8, 2025, accessed on January 14, 2026.
3 Matthew Knittel, Corporate Response to Accelerated Tax Depreciation: Bonus Depreciation for Tax Years 2002 – 2004, Office of Tax Analysis, U.S. Department of Treasury, OTA Working Paper 98, May 2007, accessed on January 14, 2026.
4 Treas. Reg. §1.168(k)-2(k)(5), Code of Federal Regulations, accessed on January 14, 2026.
5 Sec. 2.02(2)(a), Notice 2026-11, Interim Guidance on Additional First Year Depreciation Deduction under 168(k), January 14, 2026, last accessed on January 15, 2026.
6 With the Golden Globes, Podcasts are Ready for Their Close-Up, The New York Times, January 11, 2026, accessed on January 15, 2026.
7 IR-2026-05, Use IRS Free File to conveniently file your return at no cost, (January 9, 2026), last accessed on January 15, 2026.