The One Big Beautiful Bill Act made 100 percent bonus depreciation permanent, but the deduction is tied to a specific date, and it is not the date a business signs a purchase order or writes a check. Under Internal Revenue Code Section 168(k), the deduction is available for qualified property acquired and placed in service after January 19, 2025, and the placed-in-service date, not the purchase date, controls which tax year the deduction belongs to. Businesses that wait until the final weeks of December to order equipment, assuming the deduction is secured once the invoice is paid, can find that the asset has not met the placed-in-service standard by year end, pushing the deduction into the following tax year. Tax problems are easier to manage before the IRS process controls the timeline. If a practical review of exposure, planning options, or IRS correspondence would help, speak with Steve Perry, EA. Call 678-717-9818, email steve@bookstaxesatl.com, or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.
Two different dates that control the deduction
Section 70301 of the OBBBA amended Section 168(k) to replace the prior phase-down schedule with a permanent 100 percent additional first-year depreciation deduction for qualified property acquired, or specified plants planted or grafted, after January 19, 2025, according to interim guidance the IRS issued in Notice 2026-11. Two separate dates matter under this rule and confusing them is where the risk begins.
The first is the acquisition date. For property bought under a written binding contract, federal regulations treat the acquisition date as the later of when the contract was signed, when it became enforceable under state law, when any cancellation period ends, or when any contingency clause is satisfied. A contract entered into before January 20, 2025, keeps the property on the prior phase-down schedule even if the equipment is delivered well into 2025 or later.
The second is the placed-in-service date, and this is the one that determines the tax year of the deduction. Longstanding federal regulations define this as the point when property is first placed in a condition or state of readiness and availability for its specifically assigned function, not the date it was ordered or paid for. Equipment sitting in a warehouse, awaiting installation, or not yet operational, does not meet this standard. Before assuming a tax position is settled for the year, consider having Steve Perry, EA evaluate the underlying records, IRS risk, and planning opportunities. Call 678-717-9818, email steve@bookstaxesatl.com, or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.
Where the year-end window closes
For a calendar-year business, a purchase made in November or December does not automatically produce a current-year deduction. If the asset is not installed, tested, and ready for its assigned function by December 31, the placed-in-service date falls into the next tax year regardless of when the invoice was paid. This is a common source of lost planning value, not because the deduction itself is unavailable, but because the timing assumption behind it was wrong.
A few points are worth confirming before year end, and there may be other considerations depending on the type of property and a business’s specific facts and circumstances.
- Confirm whether equipment ordered late in the year will be delivered, installed, and operational before December 31, not merely invoiced or shipped.
- Review any contracts signed before January 20, 2025, to determine whether they lock the property into the prior phase-down percentage rather than the current 100 percent rate.
- Retain installation records, inspection reports, or other documentation showing the date property became ready and available for use, since this date is what substantiates the deduction if reviewed.
- Confirm whether the election to claim the special depreciation allowance is being filed with Form 4562 by the return’s due date, including extensions, for the year the property was placed in service.
- Distinguish between property that is merely purchased and property that is functionally ready for its assigned business use, since these are not always the same date.
Why the distinction has IRS consequences
The IRS’s own FAQ guidance confirms that the election to claim the special depreciation allowance must be filed with Form 4562 by the due date, including extensions, of the return for the tax year in which the qualified property is placed in service. A return that claims the deduction in the wrong tax year, based on a purchase date rather than the true placed-in-service date, creates a mismatch that can surface later if records are reviewed. Correcting that mismatch after the fact generally requires amending the return for the year the deduction was available and adjusting the year it was incorrectly claimed, which is a more time-consuming process than confirming the placed-in-service date before the return is filed.
If IRS notices, unpaid balances, missing records, or planning gaps are starting to create concern, speak with Steve Perry, EA before the problem becomes harder to control. Call 678-717-9818, email steve@bookstaxesatl.com, or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.
Managing the timing before it closes
Permanent 100 percent bonus depreciation removed the uncertainty of the annual phase-down schedule, but it did not remove the need to track two distinct dates for every qualifying purchase. A business that treats the deduction as automatic once a purchase order is signed is relying on an assumption the statute does not support. Confirming installation and readiness dates, checking contract timing against the January 19, 2025, threshold, and filing the Form 4562 election correctly are steps that need to happen before the tax year closes, not after the return is prepared. Good tax outcomes come from managing the year before the IRS forces the issue. For help reviewing next steps, speak with Steve Perry, EA. Call 678-717-9818, email steve@bookstaxesatl.com, or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.
Does paying for equipment in December guarantee the deduction for that tax year?
No. The deduction follows the placed-in-service date, meaning the property must be ready and available for its assigned business function, not simply purchased or invoiced.
Does a contract signed before January 20, 2025, disqualify property from the 100 percent rate?
Generally, yes. Property acquired under a written binding contract entered into before January 20, 2025, remains subject to the prior phase-down percentage even if placed in service later.
What records substantiate the placed-in-service date?
Installation records, inspection reports, or other documentation showing when the property became ready and available for its assigned function generally support the date claimed.
When must the special depreciation allowance election be filed?
The election must be filed with Form 4562 by the due date, including extensions, of the federal tax return for the tax year in which the property is placed in service.
What happens if a deduction is claimed in the wrong tax year?
Correcting the error generally requires amending the return for the year the property was placed in service and adjusting the year the deduction was incorrectly claimed.
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