Notice 2026-11 Confirms Continued Application of TCJA Bonus Depreciation Framework

The One Big Beautiful Bill Act (OBBBA) permanently reinstated 100% bonus depreciation. Following its enactment, taxpayers and practitioners sought confirmation that the long-standing regulatory framework under Section 168(k) would continue to apply, particularly with respect to acquisition dates, construction timelines, and elections.

Notice 2026-11 provides that confirmation. The IRS has retained the existing structure under Sec. 1.168(k)-2, with a single modification to the applicable date threshold.

Instead of September 27, 2017, January 19, 2025, now serves as the operative cutoff date for determining whether TCJA or OBBBA bonus depreciation rules apply.

Key Takeaways

• Notice 2026‑11 confirms that the existing TCJA bonus depreciation framework remains in place, with a new cutoff date of January 19, 2025.
• Acquired and self-constructed property follow the same rules as before, with eligibility determined by contract date or when substantial construction began.
• Component elections continue to offer opportunities for 100% bonus depreciation on parts of projects that did not meet the 10% Safe Harbor by the cutoff date.

Acquired Property

For acquired property, the written binding contract date remains the controlling factor.

• Written binding contract executed on or before January 19, 2025:
  TCJA bonus depreciation rules apply
• Written binding contract executed on or after January 20, 2025:
  OBBBA rules apply, allowing for 100% bonus depreciation

This approach mirrors prior guidance and provides continuity for transactions straddling the legislative change.

Self-Constructed Property

For self-constructed property, the analysis continues to depend on when substantial construction began.

• Substantial construction began on or before January 19, 2025:
  TCJA bonus depreciation rules apply
• Substantial construction began on or after January 20, 2025:
  OBBBA rules apply, allowing for 100% bonus depreciation

Notice 2026-11 confirms continued reliance on the 10% Safe Harbor to establish the commencement of substantial construction. If more than 10% of total construction costs have been incurred, substantial construction is deemed to have begun.

Only direct construction costs count toward this threshold. Materials, labor, and wages qualify. Architectural fees, permitting costs, and other pre-development expenditures do not.

Component Elections Remain Available

Notice 2026-11 also confirms the continued availability of component elections under Sec. 1.168(k)-2(c).

The substantial construction test applies to the overall property. However, individual components may be treated separately if they did not meet the 10% Safe Harbor by January 19, 2025.

For example, a project that began substantial construction in late 2024 would generally be subject to TCJA bonus rates. If certain components, such as specialized electrical or mechanical systems, had not reached 10% completion by 1/19/2025, those components may be eligible for 100% bonus depreciation under the component election. 

This can be evaluated on a system-by-system basis for components of a self-developed property.  Consider a project with $5,000,000 of 5-year property. You can determine that $2,000,000 of the components met the 10% threshold and were substantially acquired before 1/19/2025. However, the remaining $3,000,000 of components did not reach the 10% threshold by the cutoff date and would be therefore be eligible for 100% bonus depreciation.  

This election may be particularly valuable for large projects with long construction timelines or phased installations. Proper documentation is essential, as taxpayers must substantiate the completion status and costs associated with each component.

Electing Reduced or No Bonus Depreciation

Notice 2026-11 reiterates that bonus depreciation remains elective.

• For property placed in service in tax year 2025, taxpayers may elect a 40% bonus rate under Section 168(k)(10)
• Taxpayers may also elect out of bonus depreciation entirely under Section 168(k)(7)

These elections continue to provide flexibility for tax planning and modeling purposes.

Planning Considerations

Notice 2026-11 provides needed certainty by confirming that the existing TCJA regulatory framework remains in effect, with an updated cutoff date. Taxpayers can rely on established rules when evaluating acquisition timing, construction progress, and bonus depreciation eligibility.

For projects already underway, component elections may present meaningful planning opportunities. Taxpayers should review construction timelines, cost allocations, and documentation to determine whether certain assets may qualify for accelerated depreciation under OBBBA.

Careful analysis remains critical, particularly for projects involving multiple placed-in-service dates or complex construction schedules. Connect with EisnerAmper team using the form below for a nuanced evaluation of your property’s timeline – and a comprehensive plan to maximize benefit.