IRS issues new guidance on first-year depreciation from OBBBA

The new Notice 2026-11 from the Internal Revenue Service provides guidance on the permanent 100% additional first-year depreciation deduction for eligible depreciable property acquired after Jan. 19, 2025, provided by the One Big Beautiful Bill Act.

Processing Content

The notice also provides guidance on certain qualified sound recording productions that the OBBBA added as property that may be eligible for the additional first-year depreciation. 

In addition, the notice includes interim guidance to taxpayers that they may generally rely on the existing additional first-year depreciation deduction regulations. The notice provides rules for determining whether depreciable property is eligible for the additional depreciation deduction and for determining the amount of the deduction allowable under the OBBBA.

In general, the OBBBA provides a permanent 100% additional first-year depreciation deduction for qualified property acquired, or specified plants that are planted or grafted, after Jan. 19, 2025.

Elections

The notice provides interim guidance on elections that taxpayers can make for certain property to be eligible for the additional first-year depreciation deduction. Under the OBBBA, taxpayers may elect:

• To deduct 40% (60% for certain property having longer production periods or certain aircraft) instead of the 100% additional first-year depreciation for qualified property placed in service during the first tax year ending after Jan. 19, 2025;
• To deduct additional first-year depreciation for one or more specified plants;
• To treat certain acquired or self-constructed components of larger self-constructed property as generally eligible for the additional first-year depreciation deduction; or,
• Not to deduct the additional first-year depreciation for a qualified sound recording production.

Sound recording productions

The notice also provides interim guidance for qualified sound recording productions. In general, a qualified sound recording production:

• Is treated as acquired on the date when principal recording commences;
• Is considered placed in service at the time of initial release or broadcast; and,
• Qualifies for the additional first-year depreciation deduction if the sound recording production commences in a taxable year ending after July 4, 2025.