The IRS just clarified a significant tax-planning opportunity for property owners and investors. IRS Notice 2026-11, issued on Jan. 14, 2026, explains how to apply the newly permanent 100% bonus depreciation under the One Big Beautiful Bill Act (OBBBA). Unlike previous rules that capped depreciation at 40% in the first year, qualifying property placed in service after Jan. 19, 2025, can now be fully deducted in the first year. This can free up cash to reinvest, pay down debt, or fund renovations.
This Notice isn’t just technical; it offers a practical roadmap for claiming deductions, including for projects you build or renovate yourself. It also highlights strategic opportunities, such as the component election, which can maximize deductions on phased or multi-part projects. Understanding these rules can turn timing and planning into tangible cash-flow benefits.
What Notice 2026-11 Means for You
Bonus depreciation lets you write off the full cost of eligible property in the year it’s placed in service. Notice 2026-11 updates key dates but keeps familiar rules in place for when property is considered “acquired” and “placed in service.”
However, it’s important to understand what property qualifies. In most projects, the building itself usually doesn’t qualify for accelerated depreciation. Bonus depreciation generally applies to certain types of shorter-lived property associated with the building (e.g., equipment, fixtures, land improvements). Many property owners identify these assets through a cost segregation study, which separates qualifying personal property components from the building structure.
For purchased property, the acquisition date usually depends on when the contract becomes enforceable and all contingencies are satisfied. For self-constructed or renovated property, construction is considered “underway” when significant physical work begins or when more than 10% of the total project costs are incurred (the 10% safe harbor).
Example: A multifamily renovation begins groundwork in December 2024, with major units completed in March 2026. Using the component election, portions placed in service after Jan. 19, 2025, can qualify for 100% bonus depreciation, even if the overall project began earlier.
Timing is crucial. Only property meeting these thresholds after Jan. 19, 2025, qualifies for full expensing. Projects started earlier may still qualify if you use the component election, which considers certain parts of a project as newly eligible.
Notice 2026-11 also confirms that you can choose a reduced first-year deduction or opt out of bonus depreciation for specific property types, offering flexibility for your overall tax plan.
The Component Election: Boost Your Deductions
The component election allows investors to claim deductions for individual components of a larger self-constructed project. Even if the overall project began before Jan. 20, 2025, components placed in service or significantly worked on after that date may qualify for full depreciation.
To claim this election:
- File an election statement with your tax return
- Keep detailed records of acquisition dates and substantial work for each component
This strategy is particularly effective for phased developments, renovations, or mixed-use projects where various parts come online at different times.
Practical Steps to Maximize Benefits
Applying Notice 2026-11 doesn’t have to be complicated. To take full advantage:
- Track when work starts and how much is spent, since timing determines eligibility
- Evaluate whether the component election can boost deductions
- File all necessary statements and supporting schedules on time
- Keep detailed records to support your claims
Even minor timing or documentation oversights can reduce deductions, so careful planning is essential.
Strategic and Cash-Flow Considerations
Beyond immediate deductions, bonus depreciation directly affects cash flow by reducing taxable income in the year the property is placed in service. This can free up capital for reinvestment, upgrades, or debt repayment.
For larger properties, consider a cost segregation study to accelerate depreciation for components such as HVAC systems, roofing, or fixtures. Remember that some states might not follow federal bonus depreciation rules, and deductions can be limited by passive activity or at-risk rules for investors in partnerships or LLCs.
Putting Bonus Depreciation to Work
IRS Notice 2026-11 outlines a straightforward path to 100% bonus depreciation, providing property owners and investors with a concrete cash-flow benefit. By understanding acquisition and placed-in-service dates, strategically utilizing the component election, and maintaining detailed records, you can maximize deductions and strengthen your overall tax strategy.
To maximize this opportunity, it’s essential to plan carefully and consider how bonus depreciation integrates into your overall investment strategy. Reach out to a member of our real estate team to discuss how these rules apply to your properties and explore ways to enhance your deductions and cash flow.
© Copyright CBIZ, Inc. All rights reserved. Use of the material contained herein without the express written consent of the firms is prohibited by law. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. Material contained in this publication is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their organization.
“CBIZ” is the brand name under which CBIZ CPAs P.C. and CBIZ, Inc. and its subsidiaries, including CBIZ Advisors, LLC, provide professional services. CBIZ CPAs P.C. and CBIZ, Inc. (and its subsidiaries) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations, and professional standards. CBIZ CPAs P.C. is a licensed independent CPA firm that provides attest services to its clients. CBIZ, Inc. and its subsidiary entities provide tax, advisory, and consulting services to their clients. CBIZ, Inc. and its subsidiary entities are not licensed CPA firms and, therefore, cannot provide attest services.
