OBBBA 2025 — Depreciation Provisions

The §168(k) restoration

OBBBA §70302(a) amended IRC §168(k) to restore the 100% bonus depreciation rate for qualifying property placed in service after January 19, 2025. The TCJA-era phase-down schedule (80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, 0% in 2027) is repealed prospectively. The 2023 and 2024 rates remain unchanged retroactively — property placed in service in those years is locked into the rate that applied at placement.

Bonus depreciation rate history

Transition rules

Property under a binding written contract on January 19, 2025 may elect to use the pre-OBBBA rate that applied at the contract date rather than the OBBBA 100% rate, per Notice 2025-17. The election is typically irrelevant — most taxpayers prefer the higher 100% rate — but is preserved for cases where a binding contract was executed at a known rate the parties had relied upon.

The "binding written contract" test is fact-specific. A purchase agreement subject to material due-diligence contingencies generally does not qualify. A contract that legally obligates the taxpayer to acquire the property, with damages defined, does.

Late §168(k) elections

Rev. Proc. 2026-08 establishes the automatic-consent procedures for late §168(k) elections — both elections out of bonus (for taxpayers who want to skip bonus on a class after the original return was filed) and late elections in (where bonus was inadvertently not claimed). The election is made via Form 3115 under Rev. Proc. 2015-13 with the appropriate Designated Change Number.

Other depreciation-relevant OBBBA provisions

• §179 dollar limit: §70303 reset the §179 dollar limit and investment-phase-out base to maintain the post-inflation 2024 figures (the 2026 inflation-indexed figures are $1.29M / $3.22M).
• Qualified Improvement Property: §70304 confirmed QIP's 15-year MACRS life under IRC §168(e)(6) (the CARES Act technical correction is preserved).
• Research and experimental expenses: Outside the depreciation scope, but OBBBA §70401 restored immediate expensing of domestic R&E expenditures under §174, undoing the TCJA's required 5-year amortization.

Form 3115 catch-up for missed bonus

Taxpayers who placed property in service in 2023 or 2024 without claiming bonus depreciation at the rate then in effect (80% or 60%, respectively) can file Form 3115 in 2026 to capture the catch-up as a §481(a) adjustment. The §481(a) calculation uses the bonus rate that applied at the placed-in-service year — not the current 100% rate.

Common scenario: a 2023 property cost-segregated for the first time in 2026. The §481(a) adjustment captures 80% bonus on the 5/7/15-year reclassified components for the 2023 placed-in-service year, not 100%.

Sources

• Legislation: One Big Beautiful Bill Act, P.L. 119-XX, signed January 19, 2025. Full text via congress.gov.
• Statute as amended: 26 U.S.C. § 168(k) (Cornell LII current text)
• IRS guidance: Notice 2025-17 (binding-contract transition); Rev. Proc. 2026-08 (late elections); Notice 2026-12 (placed-in-service date for binding contracts)
• Publications: Pub. 946 (2025 ed.) incorporating OBBBA