Tax strategies Key insights The IRS released interim guidance clarifying how to qualify for 100% bonus depreciation — critical for businesses planning capital investments. It spells out what counts (like QIP and certain used assets), what doesn’t, and why acquisition and placed-in-service timing really matters. If you operate through partnerships, S corporations, or consolidated groups, entity-level rules and elections could significantly impact your tax strategy. Pairing this guidance with a cost segregation study could unlock faster deductions and stronger early cash flow — especially for capex-heavy industries like real estate, manufacturing, retail and health care. Discover how bonus depreciation could benefit your business. Notice 2026-11 outlines what qualifies, when assets are considered acquired or placed in service, and how different business structures are affected — helping you make smarter, more confident tax decisions. Overview: IRS Notice 2026-11 and why it matters The IRS has issued Notice 2026‑11, providing interim guidance on the reinstated 100% bonus depreciation rules under Section 168(k). Taxpayers may rely on this guidance until Treasury releases proposed regulations, which are expected to align with the notice. Below is a clear breakdown of what counts, what doesn’t, and how strategic planning (including cost segregation studies) can enhance benefits. Want a broader look at depreciation strategies? Explore our comprehensive overview on Section 179 and bonus depreciation . Interim IRS guidance defines eligible versus ineligible property What property qualifies for 100% bonus depreciation under IRS Notice 2026-11? The notice confirms that bonus depreciation applies to several categories of short life assets, including: Tangible property with a recovery period of 20 years or less Qualified improvement property (QIP) — interior improvements made to non-residential buildings Computer software Specific fruit or nut-bearing plants For real estate owners, QIP is often the most meaningful category, as it can apply to tenant improvements, lobby upgrades, interior remodels, and other non-structural building enhancements. What does not qualify? Bonus depreciation generally is not available for property used by certain utilities, for property used primarily outside the United States, or for assets acquired from related parties or through certain tax‑free transactions. These exclusions reflect longstanding anti‑abuse rules and remain important considerations when structuring acquisitions or internal transfers. Used property can qualify — with important limitations One of the most advantageous features for property owners is that used property can qualify for bonus depreciation. To do so, all of the following must be true: The taxpayer had no prior direct or indirect ownership interest, The property was not purchased from a related party, and The taxpayer did not previously use the property prior to acquisition. The IRS also outlines anti-abuse rules designed to prevent artificial “refreshing” of assets through circular sales or sale leaseback transactions. When acquiring existing real estate, particularly value add or repositioning projects, these rules come into play when evaluating bonus eligible components. Why timing matters for bonus depreciation eligibility The timing of when property is acquired and when it is placed in service continues to play a critical role in determining eligibility for bonus depreciation. Acquisition timing Binding contracts When purchased under a written binding contract, property is considered acquired when the taxpayer: Enters into a binding written contract that is enforceable under state law Does not limit damages to a nominal amount Is not merely a revocable option This distinction is particularly important in real estate transactions, where purchase agreements frequently span multiple tax years. If there’s a contract, the acquisition date isn’t just the signature date. It’s the latter of: The date the contract was signed The date it became enforceable under state law The end of any cancellation period The satisfaction of all contingency clauses A contract is treated as binding only if it’s enforceable under applicable law and doesn’t limit damages to a specified amount. If the buyer can walk away with minimal consequence, the contract is not considered a written binding contract, and the rules for property acquired pursuant to a non-binding contract must be applied. Non-binding contracts The test to determine the acquisition date for property purchased under a non-binding contract is much simpler. Depending on the taxpayer’s overall accounting method, the acquisition date is the date when a taxpayer paid or incurred more than 10% of the total cost of the property, excluding the cost of any land and preliminary activities. Self-constructed assets Placed‑in‑service timing Placed‑in‑service determinations depend on the nature of the asset. The IRS reiterates that the analysis can differ for new construction, long‑production‑period property, and systems that operate independently within a larger building. Special electing out of 100% bonus depreciation under IRS guidance Taxpayers may elect to claim bonus depreciation at the 40% rate (or 60% for certain property having longer production periods or certain aircraft). This election must be made for all qualified property placed in service during the year instead of by class under general bonus depreciation election out rules. This special rule offers meaningful flexibility in managing overall tax outcomes. This option can be particularly useful when a taxpayer is seeking to smooth taxable income across multiple years, manage the creation or use of net operating losses, or limit the tax impact on pass‑through owners whose individual circumstances may differ. The IRS notice provides guidance on how and when this election can be made but the election out of bonus depreciation is irrevocable. How entity structure affects bonus depreciation The IRS guidance also clarifies how bonus depreciation applies across common ownership entities. How does bonus depreciation apply to partnerships and S corporations? Bonus depreciation is determined at the entity level Certain elections must be made by the entity, not the partners or shareholders How does bonus depreciation apply for consolidated groups? Basis adjustments apply to transfers within the group Anti-abuse rules prevent shifting assets to create bonus depreciation benefits These distinctions matter for property owners who hold assets through multi-tiered structures, joint ventures, or REIT subsidiaries. IRS provides interim guidance on transition rules and safe harbors The IRS also provides a series of transition rules and safe harbors designed to ease compliance as taxpayers navigate the updated bonus depreciation framework. These provisions apply to property acquired under contracts executed before the One Big Beautiful Bill Act, to long‑production‑period property that spans multiple tax years, and to projects involving disaster relief or certain government contracts. Real estate insight: Key takeaways for owners and investors While the IRS’s interim guidance on 100% bonus depreciation applies across industries, several provisions are especially relevant to real estate owners, investors, and developers: • Qualified improvement property (QIP), like tenant buildouts and interior upgrades, remains bonus-eligible. For example, a commercial landlord renovating office suites with new lighting, flooring, and HVAC systems may be able to fully deduct those improvements in the first year. • Used property can qualify if not previously owned, used, or acquired from related parties. This is particularly valuable for value-add or repositioning projects where existing assets are being acquired and improved. • Entity structure matters — especially for real estate owners operating through LLCs taxed as partnerships, REIT subsidiaries, or joint ventures. The guidance clarifies bonus depreciation is determined at the entity level, and certain elections must be made by the entity itself. • Safe harbors and transition rules can be especially helpful for real estate projects with long timelines, legacy contracts, or phased construction schedules spanning multiple tax years. CLA’s real estate professionals and tax advisors can work closely with you to review compliance and enhance the benefits of bonus depreciation. These rules are particularly important for taxpayers managing multi‑year procurement or construction timelines, where acquisition dates and production schedules often intersect with changing tax laws. Cost segregation: A critical tax strategy Bonus depreciation becomes most valuable when paired with a cost segregation study . A cost segregation study identifies building components that can be depreciated over shorter lives — many of which are eligible for 100% bonus depreciation. This includes components of: Site improvements Specialized finishes By reclassifying these assets into shorter life categories, property owners can accelerate deductions and significantly improve early year cash flow. This is particularly impactful for: Newly constructed buildings Renovation or repositioning projects How CLA can help you apply recent IRS guidance With bonus depreciation restored to 100%, the stakes and opportunities are large. The new IRS guidance helps clarify the rules, but determining the right strategy requires technical experience and careful planning. CLA’s cost segregation teams help property owners: Identify bonus eligible components Evaluate entity level and election implications Implement studies efficiently and transparently Integrate findings with broader tax and investment strategies Whether you're planning a capital project or acquiring a property, our team can help you unlock the full value of these enhanced incentives. Contact us Discover how bonus depreciation could benefit your business. Complete the form below to connect with CLA. Connect © 2026 CliftonLarsonAllen. All rights reserved. "CliftonLarsonAllen" and "CLA" refer to CliftonLarsonAllen LLP. Securities and investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor, member FINRA/SIPC. CliftonLarsonAllen is a Minnesota LLP, with about 120 locations across the United States. The Minnesota certificate number is 00963. The California license number is 7083. The Maryland permit number is 39235. 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