What Permanent 100% Bonus Depreciation Means for Auto Dealerships

FOLLOW A MAINTENANCE PROGRAM

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SEARCH FOR A TRUSTED MECHANIC

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CHECK THE AIR PRESSURE IN YOUR TIRES

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REVIEW YOUR SUSPENSION FREQUENTLY

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SERVICE YOUR VEHICLE AS REGULARLY AS POSIBLE

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“NISI QUIS ELEIFEND QUAM ADIPISCING VITAE ALIQUET BIBENDUM ENIM FACILISIS GRAVIDA NEQUE VELIT EUISMOD IN PELLENTESQUE”

CONCLUSION

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On January 14, 2026, the IRS released Notice 2026-11, which provides interim guidance on the new permanent 100% bonus depreciation rules under the One Big Beautiful Bill Act (OBBBA). Translation: for many business purchases, Uncle Sam is now letting you deduct the full cost up front, instead of waiting years to get your money back.

What changed?

Under prior law, bonus depreciation was slowly going away. OBBBA put a stop to that and made 100% bonus depreciation permanent for qualifying property acquired after January 19, 2025. If you buy the right kind of asset and place it in service, you may be able to write off the entire cost in year one; no waiting, no phase-outs, no cliffhangers.

What types of assets qualify?

Qualified property generally includes:

Equipment with a tax life of 20 years or less
Computer software
Qualified improvement property (interior improvements to existing buildings)
Certain utility and specialty property

The notice provides “bridge rules,” which is IRS-speak for “you don’t have to wait for new regulations to start using this.”

Why this matters to auto dealerships

While cars held for sale are still inventory (sorry, no instant write-off there), dealerships own plenty of other assets that may now qualify:

1. Fixed assets and equipment
Service lifts, diagnostic tools, shop equipment, computers, parts shelving, office furniture, lighting, and signage often qualify for full first-year expensing. Basically, if it’s bolted down and not for resale, it deserves a second look.

2. Facility upgrades and image programs
Showroom remodels, service lane expansions, and manufacturer image upgrades can include components that qualify for 100% bonus depreciation. The notice clarifies when construction is considered to have started which can be very important when projects span multiple years and budgets.

3. Cost segregation just got more interesting
With permanent 100% bonus depreciation, cost segregation studies can be especially valuable. Breaking buildings into shorter-life components can allow significant portions of a facility to be expensed immediately. Yes, this is where depreciation turns from “necessary evil” into “strategic weapon.”

4. You still have choices
Dealerships are not required to take 100% bonus depreciation. The IRS confirms that businesses can opt out for certain asset classes or elect a reduced first-year deduction (40%, or 60% for some long-production assets). Sometimes less now means more flexibility later. (Looking at you planes!)

5. What this does not apply to
Inventory vehicles remain inventory. However, company vehicles, service loaners, or demo vehicles treated as depreciable property may qualify, although, luxury auto limits still apply (the IRS remains unimpressed by expensive taste).

Financial statement considerations

Expect larger differences between book income and taxable income, which means more deferred taxes and more questions from lenders and manufacturers. Clear documentation and updated depreciation policies will be key.

Bottom line: Notice 2026-11 delivers certainty, opportunity, and a permanent 100% bonus depreciation rule. For dealerships investing in facilities and equipment, it’s good news but like most good things in tax, it works best with a plan.