IRS Confirms 100% Bonus Depreciation Under Section 168(k) for Property After Jan. 19, 2025

(U.S.) — U.S. business taxpayers are reassessing first-year asset write-offs in 2026 after current IRS guidance restored 100% Bonus Depreciation under Section 168(k) for certain qualified property acquired after January 19, 2025.

The shift changes the tax calculation for NRIs with U.S. business activity, H-1B professionals operating valid business structures, self-employed taxpayers, startup founders, and immigrant-owned companies that buy equipment, software, furniture, or business-use vehicles.

For many of those taxpayers, the immediate question is no longer whether they can deduct an asset in the first year. The question now is which rule applies, in what order, and what restrictions may reduce the benefit later.

Section 179 still draws much of the attention in small-business tax planning. But the current IRS treatment of Section 168(k) means bonus depreciation now requires a separate analysis in 2026, especially for taxpayers who had relied on older phase-down schedules.

IRS Topic No. 704 states that for qualified property placed in service after December 31, 2024 and before January 20, 2025, the special depreciation allowance is generally 40%. For certain qualified property acquired after January 19, 2025, however, the additional first-year depreciation deduction is 100%.

The IRS FAQ on depreciation and recapture says the same thing. That leaves many older summaries incomplete for current planning, particularly those that still track the older sequence of 100%, 80%, 60%, 40%, 20%, and 0%.

In 2026, taxpayers should not assume bonus depreciation is limited to 20% or 0% because that had been the old scheduled direction. Current IRS guidance instead points to a renewed 100% rule for certain qualified property acquired after January 19, 2025.

That distinction matters because Section 179 and Section 168(k) are not interchangeable. They can work together, but they do not operate under the same framework.

Section 179 is an elected deduction with a dollar cap and a taxable-income limitation. Section 168(k), by contrast, is an additional first-year depreciation rule that applies to qualified property and follows a separate statutory structure.

IRS Publication 946 places the two rules in sequence. It states that taxpayers take bonus depreciation after any Section 179 deduction and before regular depreciation under MACRS.

That ordering can shape the size of the first-year deduction. A business may elect Section 179 on qualifying property, then apply Section 168(k) to the remaining qualified basis, and then compute regular MACRS depreciation on what remains.

For businesses that assumed they had to choose one method or the other, that sequencing changes the picture. The result can be a much larger first-year deduction than a taxpayer would reach by looking at Section 179 alone.

The renewed focus on Section 168(k) also shifts how tax advisers and owners must evaluate purchases. A business that already understands its 2026 Section 179 position still must ask whether the property qualifies for 100% Bonus Depreciation under the post–January 19, 2025 rule and whether later restrictions apply.

Publication 946 says bonus depreciation generally applies to qualified property. That includes tangible property depreciated under MACRS with a recovery period of 20 years or less, certain computer software, water utility property, and certain other specifically listed categories.

The same publication says bonus depreciation may apply to both new and used property, subject to the statutory requirements. That widens the rule’s reach for businesses buying assets in the ordinary course of growth.

In practical terms, common purchases may fall within the rule. Computers, business hardware, furniture, fixtures, machinery, production equipment, certain software, and shorter-life business-use tangible property generally depreciated under MACRS can all become part of the Section 168(k) analysis.

For many small businesses, the building itself may not be the main story. The shorter-life property inside the business, or tied to the business, often is.

That is one reason the rule carries extra weight for startup founders and immigrant-owned companies. A founder buying workstations, office furniture, specialized equipment, or software may find the Section 168(k) treatment more decisive than the broader attention usually given to Section 179.

The income-limit difference between the two rules adds another layer. Section 179 is limited by taxable income from the active conduct of a trade or business, and Publication 946 says disallowed Section 179 amounts are generally carried forward.

Section 168(k) does not carry the same Section 179-style business-income cap in the IRS materials discussing bonus depreciation. That can matter in startup or expansion years, when a business may have modest taxable income even as it makes large purchases.

A young company may not be able to use all the Section 179 deduction it wants in the first year. Bonus depreciation may still play a larger role in first-year cost recovery, depending on the facts.

That makes the current rule especially relevant to H-1B professionals who operate valid business structures and to self-employed taxpayers building out operations. Early spending often comes before steady profit, and the tax treatment of that spending can shape cash flow.

The rule also has implications for NRIs with U.S. business activity. Their planning may now turn less on whether an item can be written off at all and more on whether it falls within qualified property, whether it was acquired after January 19, 2025, and whether another limitation cuts back the deduction.

Still, not every asset qualifies on the same terms. Listed property remains one of the most sensitive parts of the analysis because of the risk that taxpayers may mix business and personal use.

Publication 946 treats listed property as subject to stricter standards. Listed property generally includes passenger automobiles and other property often associated with personal use.

To receive favorable depreciation treatment, the property must be used predominantly for qualified business use, generally more than 50% of total use. That business-use threshold can determine whether both Section 179 and Section 168(k) remain available.

If the threshold is not met, the consequences can be broad. Section 179 is not available, the Section 168(k) special depreciation allowance may not be available, ADS straight-line depreciation may have to be used instead, and prior excess depreciation can be subject to recapture when business use later falls below the threshold.

That caution point matters for founders and self-employed taxpayers who use one asset for both work and personal activity. A vehicle, for example, may appear to be a business purchase at the outset, but the tax treatment can change if business use does not stay above the required level.

Passenger automobiles face another limit even when bonus depreciation applies. Section 280F imposes annual depreciation caps, preventing unlimited first-year write-offs for cars.

Revenue Procedure 2026-15 sets the 2026 limits for vehicles placed in service during 2026. If bonus depreciation applies, the maximum allowable depreciation is $20,300 for the first year, $19,800 for the second year, $11,900 for the third year, and $7,160 for each later year.

If bonus depreciation does not apply, the first-year limit is $12,300. That means even a taxpayer with property that otherwise qualifies under Section 168(k) must still account for vehicle-specific limits.

Those limits make passenger cars different from many other short-life business assets. A company may receive a full first-year deduction on some equipment purchases under 100% Bonus Depreciation, while a passenger automobile remains capped year by year.

That difference is likely to affect businesses that rely heavily on mobile work, sales travel, or service fleets. It also adds another reason taxpayers cannot treat every business-use asset as if it falls under a single write-off rule.

The broader lesson from the IRS guidance is that sequencing now matters as much as eligibility. A taxpayer can no longer stop at the Section 179 question and assume the answer settles the first-year deduction.

Instead, the order governs the calculation. First comes any Section 179 deduction on qualifying property, then Section 168(k) bonus depreciation on the remaining qualified basis, and then MACRS on whatever basis remains.

For many taxpayers, that sequence determines whether the first-year deduction is large or limited. It also means older planning models may now understate what the law allows for certain post–January 19, 2025 purchases.

The return of 100% Bonus Depreciation under Section 168(k) after January 19, 2025 also changes how businesses should read older tax summaries. Materials built around the old phase-down path may still describe prior law, but they do not capture the current position reflected in IRS Topic No. 704 and the IRS FAQ.

That gap can create errors in 2026 if taxpayers assume the bonus percentage has fallen away. The current guidance points the other direction for certain qualified property acquired after January 19, 2025.

For small businesses and immigrant entrepreneurs, the issue is practical rather than theoretical. The tax result on a computer system, a set of desks, a machine purchase, or business software may now depend on a layered analysis of Section 179, Section 168(k), MACRS class life, listed-property status, business-use percentage, and vehicle caps under Section 280F.

What looked like a simple write-off decision has become a rule-ordering exercise. In 2026, that exercise starts with one threshold date: January 19, 2025.