IRS Issues Guidance on New Bonus Depreciation for Production Property
OBBBA added the ability to fully deduct certain buildings for a limited time
The Department of the Treasury and the Internal Revenue Service have recently released Notice 2026-16, providing interim guidance on the new special depreciation allowance for Qualified Production Property (QPP). Established by Section 70307 of the One, Big, Beautiful Bill Act (OBBBA), this provision introduces Section 168(n) to the Internal Revenue Code, offering a significant tax incentive for domestic manufacturers and producers.
Farmers already can deduct all of their farm buildings using bonus depreciation, however building a cheese plant requires that building to be depreciated over 39 years. This provision allows you to fully deduct in the year it is placed in service.
The 100 Percent Depreciation Benefit
Under the new guidance, taxpayers who elect to apply Section 168(n) may claim a depreciation deduction equal to 100 percent of the adjusted basis of qualified property in the year it is placed in service. This deduction must be taken before calculating any other allowable depreciation for that or subsequent taxable years.
Eligibility Criteria for Qualified Production Property
To qualify for this accelerated allowance, the property must be nonresidential real property that meets several requirements:
