The IRS issued guidance clarifying elections available to taxpayers after the One Big Beautiful Bill Act made 100% bonus depreciation permanent for certain property – previewing proposed rules on the topic. The guidance also addresses the OBBB’s expansion of the deduction to certain qualified sound recording productions. (Notice 2026-11; IR 2026-06, 1/14/2026)
OBBB Changes to Bonus Depreciation
Bonus depreciation is a tax incentive under IRC § 168(k) that allows businesses to immediately deduct a percentage of the cost of qualified property in the year it is placed in service, rather than depreciating the cost over the asset’s normal recovery period. The 2017 Tax Cuts and Jobs Act phased down the applicable bonus depreciation percentage beginning in 2023, with full phase-out scheduled for 2027 for most property. The bonus depreciation rate for 2025 pre-OBBB was just 40%.
The OBBB, however, permanently reinstated 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. It also provided transition provisions.
Specifically, under transition provisions, taxpayers may elect to apply the 40% rate (or 60% for certain long-production-period property and aircraft) for property placed in service during their first tax year ending after January 19, 2025, instead of the 100% rate. This election must be made on a timely filed return.
Taxpayers may also elect out of bonus depreciation for any class of property for the tax year. This election applies to all property in the same class placed in service during that year.
Interim Guidance on Taxpayer Elections
Notice 2026-11 announces the IRS’ intention to issue proposed rules on the OBBB’ changes to bonus depreciation. It also provides interim guidance that it anticipates will be consistent with the forthcoming rules, and which taxpayers can rely on immediately.
To determine whether property acquired after January 19, 2025, is eligible, taxpayers should generally apply existing Reg. § 1.168(k)-2 and Reg. § 1.1502-68(a) through (d), with specific date substitutions. This includes rules on making elections to treat an eligible component of a larger self-constructed property as eligible for the first-year depreciation deduction.
The notice also provides guidance on elections related to bonus depreciation that taxpayers can make for property acquired after January 19, 2025. It addresses the election to claim a reduced additional first-year depreciation deduction of 40% (or 60% for certain property with longer production periods) instead of the full 100% for property placed in service during the first tax year ending after January 19, 2025. Per the notice, to make this election, taxpayers can follow existing rules under Reg. § 1.168(k)-2(f)(3). The election can be made via the “applicable” Form 4562, Depreciation and Amortization.
Qualified Sound Recording Productions
The OBBB also adjusted bonus depreciation by adding qualified sound recording productions as eligible property under IRC § 168(k). To be eligible for 100% bonus depreciation, the sound recording must by produced and recorded in the United States and production must commence in a tax year ending after July 4, 2025.
The guidance clarifies several key points for these productions. First, a production is treated as acquired on the date that “principal recording” commences. A sound recording production is considered placed in service at the time of its initial release or broadcast.
Notice 2026-11 also clarifies that taxpayers may elect not to deduct additional first-year depreciation for a qualified sound recording production using procedures under Reg. § 1.168(k)-2(f)(1).
For more on the reduced rate transitional election for bonus depreciation, see Checkpoint’s Federal Tax Coordinator 2d ¶ L-9311.0. For more on the qualified sound recording production deduction, see Federal Tax Coordinator 2d ¶ L-9312.2
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