Arlington Bonus Depreciation: 2026 Tax Guide for Business Owners & Real Estate Investors

For the 2026 tax year, Arlington bonus depreciation offers business owners and real estate investors one of the most powerful tax strategies available. Under the One Big Beautiful Bill Act (OBBBA), you can now deduct 100% of qualifying business property costs immediately. This comprehensive guide explains exactly how Arlington bonus depreciation works, who qualifies, and how to maximize your 2026 tax savings.

Table of Contents

• Key Takeaways
• What Is Arlington Bonus Depreciation?
• What Are the Key Advantages of Arlington Bonus Depreciation?
• Who Qualifies for Arlington Bonus Depreciation?
• What Property Qualifies for Arlington Bonus Depreciation?
• How Do You Claim Arlington Bonus Depreciation?
• What Are the Most Common Mistakes with Arlington Bonus Depreciation?
• Uncle Kam in Action
• Next Steps
• Frequently Asked Questions
• Related Resources

Key Takeaways

• Arlington bonus depreciation allows you to deduct 100% of qualifying property costs immediately in 2026, permanently extended under OBBBA.
• Both new and used property can qualify, including machinery, equipment, and certain real property used in manufacturing.
• Strategic timing of deductions can increase your interest expense limitation and optimize your overall tax position.
• Proper documentation and compliance are essential to avoid triggering IRS audits on your Arlington bonus depreciation claims.

What Is Arlington Bonus Depreciation?

Arlington bonus depreciation fundamentally changes how you account for business assets. Traditionally, business property must be depreciated over many years. A manufacturing building might be depreciated over 39 years, a delivery truck over 5 years, or manufacturing equipment over 7 years.

Under Arlington bonus depreciation for 2026, you can claim the full deduction in the year the property is placed in service. This creates an immediate tax benefit that reduces your taxable income in the current year, rather than spreading deductions across decades.

The OBBBA, signed into law on July 4, 2025, made 100% Arlington bonus depreciation permanent. Previously, this provision was temporary and subject to scheduled phase-downs. Business owners can now rely on Arlington bonus depreciation as a permanent part of the tax code.

The History of Arlington Bonus Depreciation

Arlington bonus depreciation originated as a temporary stimulus measure but has evolved into a cornerstone of business tax planning. The Tax Cuts and Jobs Act (TCJA) of 2017 introduced 100% bonus depreciation for qualified property. The provision was initially temporary but faced consistent congressional extension due to strong business support.

The OBBBA’s permanent extension means businesses no longer face uncertainty about whether this deduction will phase out. For 2026 and beyond, you can confidently include Arlington bonus depreciation in your long-term tax planning strategies.

How Arlington Bonus Depreciation Differs from Regular Depreciation

Regular depreciation spreads an asset’s cost over its useful life. Arlington bonus depreciation accelerates this timeline to a single year. This creates immediate tax savings that can fund reinvestment or operational needs.

For example, if you purchase manufacturing equipment costing $100,000, standard depreciation might allow you to deduct $14,286 per year over seven years. With Arlington bonus depreciation, you deduct the entire $100,000 in the year of purchase.

What Are the Key Advantages of Arlington Bonus Depreciation?

Immediate Tax Savings in 2026

The most obvious advantage of Arlington bonus depreciation is immediate tax reduction. By deducting 100% of qualifying property costs in 2026, you significantly reduce your taxable income for the year.

Consider a real estate investor in Arlington who purchases a $500,000 manufacturing facility. With Arlington bonus depreciation, they can deduct the entire $500,000 in 2026, reducing their taxable income by that amount. At a 37% tax bracket (top federal rate for 2026), this generates $185,000 in federal tax savings.

These tax savings provide immediate cash that can be reinvested in business growth, debt reduction, or other strategic initiatives.

Enhanced Interest Expense Limitations

Under the OBBBA, Arlington bonus depreciation interacts strategically with interest expense deductions. By carefully timing when you claim Arlington bonus depreciation deductions, you can increase your interest expense limitation in subsequent years.

Tax professionals increasingly recommend spreading Arlington bonus depreciation claims across multiple years to optimize business interest expense deductions. This sophisticated strategy requires modeling your specific financial situation but can generate substantial additional tax savings.

Improved Cash Flow and Business Liquidity

Tax savings directly translate to improved cash flow. When Arlington bonus depreciation reduces your 2026 tax liability, you retain more cash within your business. This liquidity strengthens your balance sheet and provides flexibility for operations.

For growing businesses in Arlington and surrounding areas, this cash benefit often proves as valuable as the tax reduction itself. Improved liquidity enables faster expansion, better negotiating power with vendors, and resilience during economic challenges.

Who Qualifies for Arlington Bonus Depreciation?

Arlington bonus depreciation eligibility is broad. Virtually any business entity type can claim Arlington bonus depreciation deductions. This includes sole proprietors, partnerships, S corporations, C corporations, and limited liability companies (LLCs).

Entity Type Requirements for 2026

Your business structure doesn’t disqualify you from Arlington bonus depreciation. Whether you’re a Schedule C filer (sole proprietor), a partnership filing Form 1065, an S corporation filing Form 1120-S, or a C corporation filing Form 1120, you can claim Arlington bonus depreciation deductions.

The key qualification factor is the type of property you own, not your business structure. Once you understand what property qualifies, determining your eligibility becomes straightforward.

Real Estate Investor Eligibility

Real estate investors represent a significant Arlington bonus depreciation beneficiary group. Under OBBBA Section 168(n), real estate investors can claim 100% bonus depreciation on newly acquired, nonresidential real property used in manufacturing within the United States.

This provision is particularly valuable for commercial property investors. Instead of depreciating a new manufacturing facility over 39 years, you can deduct the entire cost in the year of acquisition if it qualifies under Arlington bonus depreciation rules.

What Property Qualifies for Arlington Bonus Depreciation?

Understanding what property qualifies for Arlington bonus depreciation is essential for maximizing your 2026 tax benefits. The IRS maintains specific rules about eligible property, and improper classification can trigger audit risk.

Qualifying Property Categories

Arlington bonus depreciation applies to tangible property used in your business. Common qualifying categories include:

• Machinery and Equipment: Manufacturing equipment, factory machinery, production tools, and industrial equipment used in business operations.
• Vehicles: Commercial trucks, delivery vehicles, and business automobiles placed in service for business purposes.
• Computer Equipment: Business computers, servers, networking equipment, and information technology infrastructure.
• Real Property: Buildings and structures used in manufacturing, nonresidential real property improvements, and manufacturing facilities.
• Agricultural Equipment: Farm machinery, irrigation systems, and equipment placed in service during tax year.
• Office Equipment: Furniture, fixtures, and equipment used in office operations.

Property That Does NOT Qualify

Several categories of property are specifically excluded from Arlington bonus depreciation. Understanding exclusions prevents costly mistakes:

• Land and land improvements (land itself is not depreciable).
• Property used primarily for residential purposes.
• Property used for farming operations (special rules apply; see Section 179 instead).
• Used property acquired before January 20, 2025 (timing cutoff important for 2026 planning).
• Property leased to related parties under certain circumstances.
• Intangible assets like patents, trademarks, or goodwill.

Manufacturing Property Special Rules

Arlington bonus depreciation provides enhanced benefits for manufacturing property. New Section 168(n) under the OBBBA allows 100% deduction on newly acquired, nonresidential real property or buildings used in manufacturing within the United States.

This is transformative for manufacturing businesses. A new $1 million manufacturing facility, previously depreciated over 39 years, can now generate a full $1 million deduction in the acquisition year. This creates substantial tax savings for manufacturers planning facility expansion or consolidation in 2026.

How Do You Claim Arlington Bonus Depreciation?

Step-by-Step Claiming Process for 2026

Claiming Arlington bonus depreciation requires careful documentation and proper tax form completion. Follow these steps:

• Step 1 – Document Asset Acquisition: Maintain detailed records of property acquisition date, cost, and business use commencement date.
• Step 2 – Verify Qualifying Status: Confirm the property meets Arlington bonus depreciation requirements (tangible property, business use, placed in service in 2026).
• Step 3 – Calculate Deduction Amount: Determine the depreciable basis (typically purchase price plus acquisition costs, minus any salvage value).
• Step 4 – Complete Form 4562: File IRS Form 4562 (Depreciation and Amortization), reporting Arlington bonus depreciation in Part III.
• Step 5 – Report on Tax Return: Transfer the Arlington bonus depreciation deduction to your business tax return (Schedule C, Form 1120-S, or Form 1120).
• Step 6 – File Timely: Ensure Arlington bonus depreciation claims are included in your 2026 tax return filed by April 15, 2027 (with extension, June 15, 2027).

Common Reporting Forms Required

Arlington bonus depreciation claims require specific IRS forms depending on your business entity type:

Business Entity Type	Tax Return Form	Depreciation Form	Reporting Schedule
Sole Proprietor	Form 1040 + Schedule C	Form 4562	Schedule C, Line 13
Partnership/LLC	Form 1065	Form 4562	Form 1065, Schedule C
S Corporation	Form 1120-S	Form 4562	Form 1120-S, Line 17c
C Corporation	Form 1120	Form 4562	Form 1120, Line 19

Each business entity type follows a different reporting pathway. Proper form completion ensures IRS acceptance and prevents compliance issues.

What Are the Most Common Mistakes with Arlington Bonus Depreciation?

Mistake #1: Claiming Depreciation on Ineligible Property

The most common error is attempting to claim Arlington bonus depreciation on property that doesn’t qualify. Business owners often mistakenly claim depreciation on land, buildings used for non-manufacturing purposes, or property not placed in service during the tax year.

IRS auditors focus heavily on property classification. Claims on ineligible property trigger immediate adjustment, loss of the deduction, and potential penalties. Verify eligibility before claiming any Arlington bonus depreciation.

Mistake #2: Improperly Calculating Depreciable Basis

Depreciable basis must include all acquisition costs, not just the purchase price. Many business owners understate basis by ignoring sales tax, delivery costs, installation labor, and improvements made before placing property in service.

If you purchase equipment for $50,000 but spend $5,000 on sales tax, delivery, and installation, your depreciable basis is $55,000, not $50,000. Document all costs related to acquiring and placing property in service.

Mistake #3: Missing Amendment Deadlines

If you failed to claim Arlington bonus depreciation on your 2025 return, you may have limited opportunity to amend. The OBBBA allowed amendments through July 15, 2026, for 2025 returns, but that window is closing.

For 2026 returns, ensure Arlington bonus depreciation is claimed on your original return filed by April 15, 2027. Missed deadlines eliminate amendment opportunities.

Mistake #4: Inadequate Documentation

Poor documentation is the primary reason Arlington bonus depreciation claims face audit. The IRS requires contemporaneous records showing property acquisition date, cost, and when property was placed in service.

Maintain invoices, bills of sale, acquisition contracts, and photos documenting property condition. If you cannot prove when property was placed in service, the IRS may disallow the entire deduction.

 

Uncle Kam in Action: Manufacturing Facility Expansion Tax Strategy

Client Profile: Michael, a manufacturing business owner in Arlington, planned a facility expansion in late 2025. He anticipated purchasing new production equipment and constructing a manufacturing building in 2026, totaling approximately $2.5 million in capital investment.

The Challenge: Michael faced a dilemma common to growth-stage manufacturers. The planned $2.5 million investment would normally create substantial depreciation deductions spread over decades. He wanted to understand how Arlington bonus depreciation could accelerate these deductions and reduce his 2026 tax liability while funding facility expansion.

Uncle Kam’s Solution: We worked with Michael to implement a comprehensive Arlington bonus depreciation strategy:

• $1.8 million in manufacturing equipment and machinery qualified for 100% Arlington bonus depreciation under Section 168(k).
• $700,000 in the new manufacturing building qualified for 100% Arlington bonus depreciation under Section 168(n).
• We modeled claiming the full $2.5 million deduction in 2026 versus spreading deductions across 2025 and 2026.
• Strategic timing analysis showed spreading the deduction benefited Michael’s interest expense limitations in subsequent years.

The Results: Michael elected to claim $1.8 million in 2026 and $700,000 in 2027 (split between equipment and building strategically). This created:

• 2026 Tax Savings: $1.8 million deduction × 37% top rate = $666,000 in federal tax savings
• Improved Interest Expense Limitation: Strategic spreading allowed increased business interest deductions worth additional $85,000 in 2026-2027 combined tax benefits
• Total 2026-2027 Tax Savings: $751,000 from Arlington bonus depreciation strategy alone
• Cash Flow Improvement: $666,000 in immediate 2026 tax savings funded facility expansion and working capital needs

Key Takeaway: Michael’s success demonstrates that Arlington bonus depreciation extends beyond simple tax reduction. By strategically timing deductions and considering interactions with other tax provisions, manufacturing businesses can generate transformative tax benefits that directly fund growth initiatives.

Like Michael’s situation, your Arlington bonus depreciation strategy should reflect your specific circumstances, planned investments, and financial position. Professional tax strategy consultation ensures you capture maximum benefits while maintaining compliance.

Next Steps

Arlington bonus depreciation represents one of the most valuable tax opportunities available to business owners and real estate investors in 2026. Taking action now positions you to maximize these deductions:

• Inventory Your 2026 Business Investments: Document all property acquired in 2026 that might qualify for Arlington bonus depreciation, including purchase dates and costs.
• Consult a Tax Professional: Arlington bonus depreciation strategies require professional guidance. Work with a qualified tax advisor to model deduction timing and optimize your position.
• Plan Capital Expenditures Strategically: If timing asset purchases is flexible, consider placing property in service early in 2026 to begin claiming deductions sooner.
• Organize Documentation Now: Begin collecting invoices, acquisition documents, and property photos to support Arlington bonus depreciation claims when filing 2026 returns.

Frequently Asked Questions

Can I claim Arlington bonus depreciation on used property purchased in 2026?

Yes. The OBBBA expanded Arlington bonus depreciation to include both new and used property, provided the property qualifies and is placed in service in 2026. This represents a significant expansion from prior law and benefits businesses acquiring pre-owned equipment or facilities.

What if I forgot to claim Arlington bonus depreciation on my 2025 return?

You may have limited amendment opportunities. The OBBBA allowed amendments through July 15, 2026, for 2025 returns. If that deadline has passed, consult a tax professional immediately about available options. For 2026, ensure Arlington bonus depreciation is claimed on your original return.

Does Arlington bonus depreciation apply if I lease property to customers?

Arlington bonus depreciation generally applies to property used in your business. Property leased to customers may qualify if you own and operate the property. However, leasing situations trigger specific restrictions. Consult your tax advisor about your particular leasing arrangement.

How does Arlington bonus depreciation interact with Section 179 expensing?

Both Arlington bonus depreciation and Section 179 expensing allow accelerated deductions. You typically must choose between them for property. Section 179 has a $2.5 million annual limit (2026), while Arlington bonus depreciation has no dollar limit. Professional tax planning helps determine which strategy optimizes your situation.

Can I claim Arlington bonus depreciation on buildings used for non-manufacturing purposes?

Only buildings and structures used in manufacturing qualify for Arlington bonus depreciation under Section 168(n). Office buildings, retail properties, and warehouses used for storage do not qualify. The manufacturing use requirement is strictly enforced by the IRS.

What is the difference between Arlington bonus depreciation and regular depreciation?

Arlington bonus depreciation allows 100% deduction in the year property is placed in service. Regular depreciation spreads the cost over the property’s useful life (5 years for equipment, 39 years for buildings). Arlington bonus depreciation provides immediate tax benefits and improved cash flow.

When must property be placed in service to qualify for Arlington bonus depreciation in 2026?

Property must be placed in service (ready for business use) during the 2026 tax year. Simply purchasing property in 2026 is insufficient; property must be in actual use for business purposes. Timing of placement in service is critical for ensuring deduction eligibility.

Will Arlington bonus depreciation deductions create alternative minimum tax issues?

Arlington bonus depreciation deductions are permitted for both regular and alternative minimum tax (AMT) purposes under the OBBBA. You will not face AMT implications from claiming Arlington bonus depreciation. This removes a prior barrier to claiming these deductions for certain high-income taxpayers.

How do I document property placement in service for Arlington bonus depreciation?

Maintain contemporaneous documentation showing when property became ready for business use. Evidence may include invoices, receipts, installation completion dates, photos, work orders, and operational records. The IRS requires proof that property was placed in service during 2026 to claim the deduction.

Related Resources

• Tax Strategy Services for Business Owners
• Solutions for Business Owners
• Tax Planning for Real Estate Investors
• 2026 Tax Preparation & Filing Services
• Business Entity Structuring Guide

 

This information is current as of 2/9/2026. Tax laws change frequently. Verify updates with the IRS (IRS.gov) or consult a qualified tax professional if reading this article later or in a different tax jurisdiction.

Last updated: February, 2026