Bonus depreciation is back to 100 percent for good, and the IRS has now issued the guidance business owners need to actually use it. Under the One, Big, Beautiful Bill Act (OBBBA), Congress made the full first-year write-off for equipment and other qualified property permanent, reversing a phase-down that was set to drop bonus depreciation to 40% this year and disappear entirely by 2027. That is real news for any business planning to buy equipment, vehicles, or make qualified improvements. But if you are deciding when and how to make that purchase, the local side of the equation now looks very different depending on whether your business sits in Houston, The Woodlands, or Denver.
What OBBBA and IRS Notice 2026-11 Actually Changed
IRS Notice 2026-11 gives businesses interim guidance for applying the new bonus depreciation rules while formal regulations are drafted. The headline point: 100% bonus depreciation is now permanent for qualified property — most equipment, machinery, vehicles, software, and qualified improvement property with a MACRS recovery period of 20 years or less — placed in service after January 19, 2025. Unlike the original 2017 rules, there is no sunset date built back into the law this time.
Section 179 expensing, which lets many small businesses write off equipment purchases directly rather than through bonus depreciation, also grew for 2026: the deduction cap is now $2.56 million, with the phase-out starting once total equipment purchases exceed $4.09 million. Businesses can also elect a reduced first-year rate of 40% (60% for certain longer-production-period property) instead of the full 100%, which can help when a full write-off would trigger other limitations — for example, pushing income too low to make full use of the qualified business income deduction.
The bottom line: if you were holding off on equipment purchases waiting for tax law to stabilize, it has. The numbers for buying versus leasing, and for timing purchases around your fiscal year, are more favorable than they have been since 2022.
Texas: A Historic Break on the Local Side
Property tax on business equipment — what Texas calls business personal property, or BPP — has always been a separate cost that federal depreciation rules do nothing about. That changed this year. Texas voters approved Proposition 9 in November 2025, raising the BPP exemption from $2,500 to $125,000 in taxable value, effective for the 2026 tax year. Businesses with multiple locations can claim the exemption separately at each one.
For most small and mid-sized businesses in Houston and The Woodlands, this means the equipment, furniture, and machinery that used to trigger a local property tax bill after the first $2,500 of value is now very likely exempt entirely. Combined with 100% federal bonus depreciation, a 2026 equipment purchase in Texas can come with essentially no downside on either the federal or local side. You still need to file the annual rendition with your county appraisal district by April 15, but for many businesses the tax owed on it will now be zero.
Colorado: The Opposite Direction
Colorado is moving the other way. The state has had its own version of equipment tax relief — a refundable income tax credit for property tax paid on the first $18,000 of business personal property value. That credit is gone for tax years beginning on or after January 1, 2026, repealed as part of the state’s broader budget-balancing changes.
That means a Denver-area business buying the same forklift, server rack, or fleet vehicle as a Houston business gets the identical, generous federal write-off under OBBBA — but no longer gets the state-level offset that used to soften the local property tax bill on that purchase. The equipment itself is not more expensive to buy, but holding onto it is now more expensive from a Colorado tax perspective than it was a year ago.
What To Do Before Year-End
- If you are in Houston or The Woodlands, confirm your major equipment purchases will be placed in service before year-end to capture 100% bonus depreciation, and check with your county appraisal district on how the new $125,000 BPP exemption applies to your 2026 rendition.
- If you are in Denver, run the full numbers on planned equipment purchases with the BPP credit repeal factored in — the federal deduction is still highly valuable, but budget for a local property tax bill you would have partly offset in prior years.
- Wherever you operate, decide between full bonus depreciation and Section 179 based on your specific income picture for the year, since the two interact differently with the qualified business income deduction and other limitations.
Whether you are comparing notes with a Houston tax attorney or handling Denver business tax planning in-house, Petry Tax & Advisory can help you time major purchases and structure elections to get the most from these changes — contact us for a consultation before you finalize your year-end equipment plans.
This post is for general informational purposes only and does not constitute legal or tax advice. Consult with a qualified professional about your specific situation.
Source: IRS Notice 2026-11 — Additional First Year Depreciation Deduction
lucy.petry@petrylawfirm.com
