Bonus depreciation drops to 20% in 2026

The broad claim that bonus depreciation “drops to 20% in 2026” is no longer true for all investors. Congress restored 100% bonus depreciation for many qualified assets acquired after January 19, 2025. (irs.gov) The Internal Revenue Service said in Notice 2026-11 that the permanent 100% deduction applies to eligible depreciable property acquired after January 19, 2025. The agency published that guidance on January 14, 2026. (irs.gov 1) (irs.gov 2) The 20% number survives in a narrower lane. IRS Publication 946 says property acquired before January 20, 2025 and placed in service after December 31, 2025 and before January 1, 2027 is generally limited to a 20% special depreciation allowance under the old phase-down schedule. (irs.gov) That means timing now turns on two dates, not one: when the property was acquired and when it was placed in service. A 2026 project can still get 100% bonus depreciation if the qualifying property was acquired after January 19, 2025 and meets Section 168(k) rules. (irs.gov 1) (irs.gov 2) For real estate owners, that usually does not mean the building itself. Residential rental buildings are generally depreciated over 27.5 years and commercial buildings over 39 years, while shorter-life components identified in a cost-segregation study can qualify for faster write-offs. (irs.gov 1) (irs.gov 2) That is why cost segregation is still in the conversation even after the law changed. The Internal Revenue Service’s audit guide says taxpayers use those studies to reclassify parts of a building into shorter recovery periods, which can open the door to accelerated depreciation, including bonus depreciation where allowed. (irs.gov) Another live planning issue is the tradeoff between bonus depreciation and the business-interest limitation. Revenue Procedure 2026-17 gives taxpayers procedures to withdraw certain Section 163(j)(7) real-property trade-or-business elections and to make a late election out of bonus depreciation under Section 168(k)(7). (irs.gov) (irs.gov) Section 1031 exchanges sit in a different bucket. They can defer gain on qualifying like-kind real-estate swaps, but they do not change the bonus-depreciation percentage that applies to a separate asset acquisition. (irs.gov) (irs.gov) So the 2026 explainer is more precise than the viral shorthand: 20% still matters for older acquisitions caught by the prior-law phase-down, while many newer qualifying assets are back at 100%. Investors rerunning models now have to sort deals by acquisition date, placed-in-service date, and asset class. (irs.gov) (irs.gov)