New IRS Guidance Clarifies 100% Bonus Depreciation Deduction for Qualified Production Property

A new but temporary special depreciation allowance for qualified production property (QPP) was created by last year’s One Big Beautiful Bill Act (OBBBA). It’s available for certain manufacturing-related real property placed in service after July 4, 2025, and before January 1, 2031. Under previous law, taxpayers had to depreciate such property over a 39-year period. The OBBBA allows them to elect a deduction equal to 100% of the property’s adjusted basis in the tax year it’s placed in service. Basically, it’s bonus depreciation for certain buildings and production facilities.

The IRS recently issued interim guidance (Notice 2026-16) that taxpayers generally can rely on until proposed regulations are published. It clarifies several important issues related to the deduction.

How Do You Determine Whether Property Qualifies as QPP?