100% Bonus Depreciation: Why the Acquisition Date Matters

A delivery date may not decide whether a commercial property qualifies for 100% bonus depreciation. For recent commercial property buyers, the 100% rate is permanent for qualifying property acquired after January 19, 2025, under IRC §168(k), according to the IRS. The 100% bonus depreciation acquisition date may be set by a written binding contract, rather than the date the property arrives.

If you bought property in 2025, the applicable rate may be 100% or 40%, depending on when it was acquired. The contract date, acquisition structure, and placed-in-service timing all matter, so a closing date alone may not tell the full story.

This article explains when 100% bonus depreciation applies, how a contract can affect the acquisition date, and what to discuss with your CPA. It also covers the difference between permanent availability and automatic eligibility, so you can assess how the rules may apply to your property.

Is 100% bonus depreciation permanent now?

Yes. The One Big Beautiful Bill Act restored 100% first-year bonus depreciation for qualifying property under IRC §168(k). The acquisition date determines whether the 100% rate is available, while placed-in-service timing and asset type still determine whether a particular purchase qualifies.

Acquisition and Placed-in-Service Timing

For the 100% rate, qualifying property must be acquired after January 19, 2025, and placed in service under the applicable tax-year rules. Qualifying property acquired after January 19, 2025, is eligible for 100% first-year bonus depreciation under IRC §168(k). The acquisition date and placed-in-service date are separate tests.

Determining the Property Acquisition Date

The acquisition date is the date used to determine when the taxpayer acquired property for bonus depreciation purposes. A written binding contract can establish that date, even if delivery occurs later. Without such a contract, the general rule may look to when the taxpayer pays or incurs more than 10% of the property’s total cost, excluding land and preliminary activities. Keep the signed agreement, amendments, invoices, and payment records for your CPA.

Federal and State Depreciation Rules

Federal bonus depreciation and state depreciation rules do not always align. Many states do not conform to federal bonus depreciation, so the state deduction may be smaller. Ask your CPA to compare the federal and state schedules for the same asset and tax year, and keep the state adjustment with your tax records to support the difference between returns.

Bonus Depreciation and Section 179

Bonus depreciation and Section 179 expensing are separate deductions with different eligibility and limitation rules. The Internal Revenue Service says the One Big Beautiful Bill Act increased Section 179 expensing and adjusted its phaseout rules. Section 179 generally does not apply to property used solely to produce rental or investment income. Ask your CPA to compare each deduction’s rules and the property’s business use.

Historical bonus depreciation rates and eligibility periods

Bonus depreciation rates have changed over time, so both the tax year and acquisition history matter. For commercial property, compare each qualified asset’s timeline with the rules for its tax year. A purchase near a statutory change warrants particular attention because contract and service dates may point to different tax periods.

Key federal rates show how the allowance shifted:

• For property placed in service in 2022, the rate was 100%.
• For property placed in service in 2023, the rate was 80%.
• For property placed in service in 2024, the rate was 60%.
• For property placed in service in 2025, the rate is 100% if acquired after January 19, 2025, and 40% if acquired on or before that date.

The 2025 split makes the acquisition date central. An asset acquired on January 19, 2025, falls under the 40% rate if it is placed in service in 2025. The applicable acquisition and placed-in-service requirements must both be considered. The Tax Cuts and Jobs Act had previously provided 100% bonus depreciation for qualifying property acquired and placed in service after September 27, 2017. The One Big Beautiful Bill Act changed the current schedule.

Eligibility is determined asset by asset, not by labeling a purchase “commercial real estate.” The Internal Revenue Service identifies depreciable assets with recovery periods of 20 years or less as potentially qualified property. A cost segregation analysis can classify building components by recovery period, helping the tax team assess their eligibility. It cannot make an ineligible asset qualify.

For a hypothetical 2025 acquisition, a taxpayer may own components with different classifications. The acquisition date, placed-in-service date, and recovery period should be documented for each relevant asset. Keep the purchase agreement, invoices, asset schedules, and readiness records together. Your CPA can use them to match each component to the applicable tax-year rules and determine how its depreciation should be reported.

Acquisition-date rules for written binding contracts

A written binding contract can set the acquisition date for bonus depreciation, even when delivery happens later. For a buyer, the 100% bonus depreciation acquisition date may therefore be the date the contract was executed, not the date the property arrived. Under the One Big Beautiful Bill Act, that distinction can determine whether an acquisition falls before or after the January 19, 2025, cutoff.

Property acquired under a written binding contract is generally treated as acquired no later than the contract’s execution date. A contract entered before January 20, 2025, may place the acquisition before the effective date for the restored 100% allowance. Later delivery, payment, or installation does not, by itself, reset that date. The 100% bonus depreciation acquisition date should be assessed from the signed contract and its terms.

Consider a hypothetical equipment purchase. The buyer signs a binding contract on January 15, 2025, and receives the equipment in March. The March delivery date doesn’t move the acquisition date past January 19. If the property is placed in service in 2025, the rate may be 40%, rather than 100%. If qualifying property under a pre-January 20, 2025, contract is placed in service in 2026, the rate may be 20%. The placed-in-service tax year still matters, but the earlier contract date can affect the applicable schedule.

If there’s no written binding contract, the general acquisition-date rule differs. Property is generally treated as acquired when the taxpayer pays or incurs more than 10% of its total cost, excluding land and preliminary activities. Keep the executed contract, dated amendments, purchase orders, invoices, and payment records. Ask your CPA to assess whether the agreement is binding and identify the date used for federal depreciation reporting.

• Contract date: Retain the signed agreement and dated amendments.
• Delivery date: Keep receipt records, but don’t treat delivery alone as the acquisition date.
• Tax year: Document when the property was placed in service for depreciation reporting.

Bonus depreciation rate and effective date

The effective date determines which federal bonus rate applies, but acquisition and placed-in-service timing work together. Under IRC §168(k), qualifying property acquired after January 19, 2025, can qualify for the restored 100% allowance when it also meets the placed-in-service requirement. For a 2025 tax year, property acquired on or before January 19 generally follows the prior phase-down rate, while later acquisitions may qualify for 100%.

This distinction matters when a purchase occurs near a cutoff. The delivery date alone may not determine the acquisition date: the acquisition rules, including any written binding contract, help establish when the asset was acquired. The asset must also be ready and available for its intended business use in the relevant tax year. Keep the purchase contract and evidence of operational readiness with your depreciation records.

Some property acquired under a pre-January 20, 2025, contract may fall under transitional rates even when placed in service later. The applicable rate can be 40% for property placed in service in 2025, or 20% in 2026. The One Big Beautiful Bill Act also permits an election to use 40% for the first federal tax year ending after January 19, 2025. Certain long production period property may qualify for a 60% election instead.

For a hypothetical taxpayer with a fiscal tax year ending after January 19, 2025, the year-end can affect whether the transitional election is available for that first tax year. The taxpayer should identify the property class, acquisition date, placed-in-service date, and tax-year end before calculating the deduction. An election applies under specific rules, so don’t assume the standard 100% rate is the only available treatment.

Bonus depreciation can accelerate recovery of eligible tangible assets, but it doesn’t cover every purchase. Section 179 is a separate deduction, and the federal treatment may differ from state treatment. Ask your CPA to compare the acquisition documents, asset eligibility, and tax-year rules before reporting depreciation on Form 4562.

Engineered Tax Services: Cost Segregation

Engineered Tax Services provides cost segregation studies that help commercial property owners identify building components with different tax recovery periods. For a property affected by the 100% bonus depreciation rules, this asset-level detail can help your CPA assess which components may qualify and how depreciation should be reported.

Cost segregation does not change a property’s acquisition date or replace the purchase contract and placed-in-service records. It provides a component-level analysis to use alongside those documents and your tax advisor’s review. This can be useful after a commercial purchase when building assets have not been classified for depreciation, or when existing classifications need closer review.

Align the tax position with your investment plan

For commercial property buyers, the acquisition date is one part of a broader tax decision. The deduction’s timing can affect taxable income planning, cash needs, and the property’s eventual disposition. Before filing, give your CPA the executed purchase agreement, any amendments, and records showing when the property was ready for business use. Ask how the proposed treatment fits your investment and exit plans, not just the current year’s return.

Understanding the acquisition date for 100% bonus depreciation can also help your advisors document why a particular treatment applies. If asset classification needs more detail, cost segregation may provide an engineering-based analysis for your CPA to consider alongside the transaction records.

If you’d like to discuss your property and supporting documentation with our team, contact Engineered Tax Services. We’re glad to talk through the questions with you and your CPA.

Frequently Asked Questions

How should you plan around the timing?

Build a timeline for each asset and share it with your CPA before preparing the depreciation schedule. Include contract execution, amendments, payment milestones, delivery, installation, and operational readiness. For a building purchase, separate real estate acquisition documents from records for later equipment purchases or improvements. This helps distinguish dates relevant to acquisition from those showing when an asset was ready for business use.

What acquisition dates qualify for 100% bonus depreciation under current U.S. tax law?

Qualifying property generally must be acquired after January 19, 2025, to fall within the restored 100% allowance. Acquisition is only one eligibility requirement; the asset must also satisfy the applicable placed-in-service and property rules. A taxpayer assessing a purchase near the cutoff should assemble the signed contract, amendments, and transaction records so the acquisition date can be determined separately from later delivery or use.

Does 100% bonus depreciation apply to property acquired after January 19, 2025?

It may, if the property qualifies and meets the other applicable requirements. For example, a purchase after a cutoff may still require additional installation time before the asset is ready for business use. Keep commissioning records, acceptance documents, or other evidence of operational readiness with the asset file. Your CPA can then assess the deduction for the correct tax year rather than relying only on the purchase date.

How do written binding contracts affect the acquisition date for bonus depreciation?

A written binding contract may establish the acquisition date before delivery or final payment. That can matter when the agreement was signed close to January 19, 2025. Preserve the complete agreement, including amendments and any provisions that change the purchase terms. Give those documents to your CPA, who can assess whether the contract is binding and how its execution date affects the federal depreciation analysis.

Which types of property qualify for 100% bonus depreciation?

Potentially qualified property includes depreciable assets with a recovery period of 20 years or less, according to the Internal Revenue Service. The asset’s classification matters, so a commercial building should not be treated as one undivided item for this analysis. Ask your CPA to review the asset schedule and identify each component’s recovery period. Land itself is not depreciable property for this purpose.

Are used assets eligible for 100% bonus depreciation, and what are the requirements?

Used property may qualify if it is acquired by purchase and is new to the taxpayer claiming the deduction. The taxpayer must not have used that specific property before acquiring it. Restrictions also apply to purchases from certain related parties and controlled-group members. For used equipment, keep seller and ownership information with the purchase records so your CPA can assess these acquisition restrictions.