How Bonus Depreciation and §174A Expensing Change Your Capacity to Use a Purchased Credit

Published October 29, 2026. Permanent 100% bonus depreciation and immediate expensing of domestic research costs are good for cash flow. They also reduce regular federal tax. That can shrink the amount of purchased credit a C corporation can use under §38(c). Check capacity after these deductions, not before.

What changed

• Bonus depreciation. The OBBBA provides a permanent 100% additional first-year depreciation deduction for qualified property acquired after January 19, 2025 (IRS, IR-2026-06 and Notice 2026-11).
• Domestic research. New §174A allows a deduction for domestic research or experimental expenditures, effective for amounts paid or incurred in taxable years beginning after December 31, 2024.

Why this matters for a credit buyer

The §38(c) limit is roughly 75% of net regular tax plus $6,250 when the tentative minimum tax is not the binding limit; see the §38(c) guide. Lower taxable income means lower regular tax and lower capacity.

Illustration (21% rate, no other credits, TMT assumed zero)	Before expensing	After expensing $10,000,000
Taxable income	$20,000,000	$10,000,000
Regular tax	$4,200,000	$2,100,000
Approx. capacity (0.75 × tax + $6,250)	$3,156,250	$1,581,250

This table is a hypothetical, not a forecast. It ignores state tax, other credits and the alternative minimum tax. Your own numbers will differ.

How to plan

1. Build the projection after bonus depreciation elections and §174A deductions.
2. Subtract credits you already expect to use, such as research credits, from the §38(c) ceiling.
3. Check the NOL position (NOLs and the 80% limit).
4. Size the purchase to the remaining capacity, and recheck before the December 15 estimate.
5. Consider unused-credit rules; see carryforward and carryback rules and your ASC 740 treatment.

For the broader picture, read year-end planning for C corporations, buying credits as a C corporation and fiscal-year timing.

Educational information only, not tax, legal or investment advice, and no outcome is promised. Figures and rules were checked against the cited sources on October 29, 2026; confirm with your CPA and counsel before acting. See our disclaimer.