Treas. Reg. §1.168(k)-2

The facts

The bonus depreciation regulations (T.D. 9874, amended by T.D. 9916) set the acquisition-date rules: written binding contract tests for purchased property and physical-work / more-than-10-percent safe harbor tests for self-constructed property. The regulation still reflects the TCJA framework (September 27, 2017 acquisition dates and the applicable-percentage phase-down); it has not yet been amended for OBBBA.

What it holds

Property bought under a written binding contract is acquired under the contract-date rules; self-constructed property is acquired when physical work of a significant nature begins, with a safe harbor treating work as begun when more than 10 percent of total cost (excluding land and preliminary activities) is paid or incurred. These dates decide which bonus rate applies. For property acquired after January 19, 2025, the OBBBA statute overrides the regulation's phase-down schedule, and Notice 2026-11 directs taxpayers to apply these same rules with the OBBBA dates substituted until new regulations are issued.

Background

After the 2017 law expanded bonus depreciation, Treasury issued these regulations in T.D. 9874 and amended them in T.D. 9916. They define qualified property and, critically, set the rules for when property counts as acquired, because the acquisition date controls which bonus percentage applies.

That date question got important again in 2025. OBBBA made 100 percent bonus permanent for qualified property acquired after January 19, 2025, but the regulation's text still speaks in the old framework: September 27, 2017 acquisition dates and the applicable-percentage phase-down under section 168(k)(6).

What it established

For purchased property, acquisition runs through the written binding contract rules. Property bought under a written binding contract is acquired based on the contract date, so the paper trail of when the contract became binding is the evidence that matters.

For self-constructed property, acquisition happens when physical work of a significant nature begins. Because that moment can be hard to pin down, the regulation supplies a safe harbor: work is treated as begun when more than 10 percent of the total cost of the property, excluding land and preliminary activities like planning and design, has been paid or incurred. These same tests now carry the OBBBA line: Notice 2026-11 directs taxpayers to apply them with January 19, 2025 substituted for September 27, 2017 until new regulations arrive.

How it shows up in a study

Every bonus conclusion in a study rests on an acquisition date, and this regulation is how that date gets determined and documented. For a purchase, the file holds the contract and its binding date. For construction, the file holds either evidence of when significant physical work began or the cost ledger showing when spending crossed the 10 percent safe harbor.

Under current law the stakes are stark: 100 percent bonus turns on whether the property was acquired after January 19, 2025. A study supporting 100 percent bonus cites this regulation together with Notice 2026-11 and attaches the date evidence, because that single date can swing the entire first-year deduction.

What it does not mean

Do not read this regulation's percentages as current law. Its text is pre-OBBBA: the September 27, 2017 dates and the phase-down schedule it describes have been overridden by statute for property acquired after January 19, 2025. The regulation has not yet been amended, and Treasury has said proposed regulations are coming.

Until then, the regulation works only when read together with Notice 2026-11, which substitutes the new dates and the 100 percent rate into these rules. Citing the regulation alone for a post-January 19, 2025 acquisition, without the notice, applies repealed percentages.

Category

Bonus depreciation & expensing

Applies to

All property types

Status

Vetted

This page explains a tax authority in plain words. It is not tax advice for your situation. The way this authority applies to your property is reviewed by a licensed tax professional. Citation is provided so you or your advisor can read the primary source.