Bonus depreciation after OBBBA: what applies now

If you own a short-term rental and you have read that bonus depreciation is back to 100%, that is correct — and it may not apply to you.

The One Big Beautiful Bill Act restored a permanent 100% first-year deduction. But eligibility turns on when the property was acquired, not when it was placed in service, and the acquisition date is not always the closing date. For owners who went under contract in late 2024 and closed in 2025 — a large share of the people currently commissioning cost segregation studies — the distinction decides whether the deduction is 100% or 40%.

This is drawn from IRS Notice 2026-11, the interim guidance the IRS issued on January 14, 2026.

What the law actually says now

Before OBBBA, section 168(k) carried a declining schedule. The notice states the applicable percentage under the Tax Cuts and Jobs Act version of section 168(k)(6) was:

“40 percent for qualified property placed in service during 2025 (60 percent for certain property having longer production periods or certain aircraft)”

OBBBA changed that. Section 70301 of the Act, as the IRS describes it, amended section 168(k):

“to provide taxpayers with a permanent 100 percent additional first year depreciation deduction for qualified property acquired and placed in service, and specified plants planted or grafted, after January 19, 2025”

The annual phase-down is gone. There is no scheduled reduction to 20% and no expiry in 2027.

Fact. The above is traceable to Notice 2026-11, which implements Public Law 119-21, §§ 70301 and 70434(g), enacted July 4, 2025.

The part most summaries leave out

The effective date is written in terms of acquisition:

“OBBBA § 70301(c) provides that, except as otherwise provided in that subsection, the amendments made by OBBBA § 70301 apply to property acquired, or specified plants planted or grafted, after January 19, 2025.”

And then the sentence that decides a lot of individual cases:

“OBBBA § 70301(c)(4) contains language similar to § 13201(h)(1) of the TCJA, stating that for purposes of the effective date in OBBBA § 70301(c)(1), property is not treated as acquired after the date a written binding contract is entered into for such acquisition.”

Read that carefully. If a written binding contract was entered into on or before January 19, 2025, the property is not treated as acquired after that date — regardless of when it closed, and regardless of when it was placed in service.

The notice confirms the mechanic operates through the existing regulation, with the dates swapped: taxpayers apply rules consistent with § 1.168(k)-2(b)(5) “by substituting ‘January 19, 2025’ for ‘September 27, 2017’ each place it appears.”

What counts as a binding contract

The notice points to the definition already in the regulations. A written binding contract is one enforceable under State law against the taxpayer or a predecessor that does not limit damages to a specified amount — the example given is a liquidated damages provision.

The acquisition date for property bought under such a contract is the later of:

• the date the contract was entered into
• the date it became enforceable under State law
• if there are cancellation periods, the date all of them end
• if there are contingency clauses, the date all conditions are satisfied

For a residential purchase agreement, those last two matter. An inspection contingency or a financing contingency that ran into February 2025 may move the acquisition date past the cutoff.

Professional question. Whether a specific purchase agreement is a written binding contract, and what its acquisition date is under these rules, is a determination for your CPA or tax counsel. What an owner can do is make sure the question gets asked, and that the executed contract, the contingency-removal dates, and the closing documents are all preserved and available.

Why this matters more for short-term rentals

Bonus depreciation matters to an STR owner mainly through cost segregation. A study reclassifies part of the purchase price into 5-, 7-, and 15-year property, and the bonus percentage determines how much of that lands in year one.

The gap between 100% and 40% is not a rounding difference. On the same study, the same property, and the same owner, the first-year deduction differs by a factor of two and a half — which changes whether a study was worth commissioning at all, and changes any projection built on the assumption that the full amount would be deductible immediately.

Owner observation. The owners most exposed to this are the ones least likely to catch it: people who signed in the fourth quarter of 2024, closed in the first half of 2025, and are reading 2026 guidance that says the rate is 100%. The guidance is accurate. The application to their property may not be.

There is also an election going the other way

The notice describes an election under section 168(k)(10) allowing a taxpayer to deduct 40% instead of 100% for qualified property placed in service during the first taxable year ending after January 19, 2025.

That is not an error. There are situations where a smaller first-year deduction is preferable — where a large loss cannot be used currently, or where deferring depreciation preserves basis for a future year. Whether that applies is a planning question, and it is one worth raising rather than defaulting to the largest available number.

What this guidance does not settle

Notice 2026-11 is interim guidance. The IRS states it intends to issue proposed regulations consistent with it, and taxpayers may rely on the interim guidance in the meantime, provided they follow it in its entirety for all eligible property placed in service in those years.

It also does not touch the questions that decide whether a bonus depreciation deduction does an STR owner any good. Whether a loss can offset other income depends on the passive activity rules and on material participation — a separate analysis this notice does not address. Bonus depreciation changes the size of a loss. It does not determine what the loss can be used against.

What an owner should actually do

Three things, none of which require a tax opinion:

1. Find the executed purchase contract and the date it became binding, including when the last contingency was removed. That single date drives the analysis.
2. Put the question to your CPA in writing, specifically: was this property acquired before or after January 19, 2025 for purposes of section 168(k), and what applicable percentage follows.
3. Check any projection you were given — from a cost segregation provider, a lender, or a spreadsheet of your own — for which bonus percentage it assumed.

EverLil Advisors does not prepare returns or render tax advice. The work here is making sure the right facts reach the right professional, and that the answer is documented rather than reconstructed years later. How the firm works, and where it stops.

---

Source. IRS Notice 2026-11, Interim Guidance on Additional First Year Depreciation Deduction under § 168(k), issued January 14, 2026, implementing Public Law 119-21 §§ 70301 and 70434(g). Read in full and quoted directly above. Other guides in this series cite their sources the same way.