Bonus Depreciation Calculator 2026 — OBBBA Restored 100%

What OBBBA Did for Bonus Depreciation

Before the One Big Beautiful Bill Act (OBBBA), bonus depreciation under Internal Revenue Code Section 168(k) was on a complete phase-out: 100% for property placed in service 2017 through 2022, then 80% in 2023, 60% in 2024, 40% in 2025, and a feared 20% drop in 2026 with full elimination to 0% in 2027. Business owners and real estate investors spent years planning around that cliff. On July 4, 2025, President Trump signed OBBBA into law, and the bill permanently restored 100% bonus depreciation for qualified property placed in service on or after January 19, 2025. There is no sunset date this time. The 2026 phase-out that every accounting firm modelled for clients simply did not happen. Property placed in service before January 19, 2025 still uses the old 40% rate, but anything after that effective date gets the full 100% first-year deduction.

Qualified vs Non-Qualified Property Under Section 168(k)

To claim bonus depreciation, the asset must be qualified property — defined as tangible property with a MACRS recovery period of 20 years or less. That covers the overwhelming majority of business purchases: machinery, equipment, computers, office furniture, vehicles (subject to luxury auto limits), off-the-shelf software, and qualified improvement property (QIP) such as interior non-structural improvements to non-residential buildings. Real property like buildings themselves (27.5-year residential or 39-year non-residential recovery periods), land, and land itself does not qualify. A key TCJA-era change kept by OBBBA is that used property now qualifies, as long as the taxpayer did not previously use it and did not acquire it from a related party. For real estate investors, cost segregation studies are more valuable than ever because they reclassify portions of a building into 5, 7, or 15-year property that now receives full 100% bonus treatment.

Bonus Depreciation vs Section 179 Expensing — Which to Use

Bonus depreciation and Section 179 both let you expense capital purchases in year one, but they work differently. Section 179 has a hard dollar cap — $1,220,000 for 2026, phased out dollar-for-dollar once total qualifying purchases exceed $3,050,000 — and cannot create or deepen a net operating loss. Bonus depreciation under 168(k) has no dollar cap, applies to every qualified asset automatically, and can create a loss that carries forward. Section 179 lets you pick specific assets to expense (useful when you want to keep some income on the books for loan covenants or tax credits), while bonus depreciation is all-or-nothing by asset class. The common playbook is to use Section 179 first on high-value items that need flexible treatment, then let 100% bonus automatically sweep the rest. For a $2 million equipment purchase, bonus depreciation typically wins because the Section 179 limit would leave $780,000 stranded on a long depreciation schedule.

How to Calculate Tax Savings from 100% Bonus Depreciation

The math is simple once OBBBA is in play: your first-year deduction equals 100% of the cost basis, and your federal tax savings equal that deduction times your marginal tax rate. A $100,000 machine purchase at a 24% federal bracket saves $24,000 in federal tax in year one, effectively dropping the after-tax cost of the asset to $76,000. Add state tax savings (where the state conforms to federal bonus rules — California, for example, does not), and the combined benefit can exceed 30% of the purchase price. The remaining basis to depreciate is zero because the entire cost is written off immediately. Compare that to pre-OBBBA 2026, where the same $100,000 machine would have generated only a 20% bonus deduction ($20,000) plus first-year MACRS on the remaining $80,000 — roughly $16,000 under half-year convention for 5-year property — for a combined $36,000 first-year deduction and about $8,640 in tax savings. OBBBA effectively tripled the year-one cash benefit of capital investment.

Disclaimer: Estimates only. Based on IRC Section 168(k) and OBBBA (Public Law 119-21, signed July 4, 2025). Rules, limits, and conventions change. Verify with your CPA or the IRS before filing. Some states do not conform to federal bonus depreciation. Last updated: April 2026.