100% Bonus Depreciation Is Back — Why Cost Segregation Matters More Than Ever
Summary
- The One Big Beautiful Bill Act (OBBBA) permanently restores 100% bonus depreciation, creating new planning opportunities for real estate investors.
- Pairing cost segregation with 100% bonus depreciation allows accelerated write-offs and greater control over long-term tax outcomes.
- Owners, funds, and family offices with recently acquired or improved property can unlock significant, often overlooked tax savings.
The permanent return of 100% bonus depreciation under OBBBA has fundamentally changed depreciation planning for real estate investors. What was once a temporary incentive under the Tax Cuts and Jobs Act (TCJA) is now a permanent feature of the tax code—making this an ideal time to revisit your depreciation strategy.
For owners of rental, commercial, or investment property, cost segregation has become one of the most powerful tools available to accelerate deductions and improve cash flow.
100% Bonus Depreciation Is Now Permanent
Under the TCJA, 100% bonus depreciation applied only temporarily and was scheduled to phase down beginning in 2023—dropping to 40% by 2025 and fully expiring by 2027.
OBBBA reversed that phase-down. Qualified property acquired and placed in service after January 19, 2025 is now eligible for permanent 100% bonus depreciation.
This allows taxpayers to immediately deduct the full cost of eligible components such as:
- Lighting and electrical systems
- Flooring and interior finishes
- Plumbing and HVAC components
- Land improvements and site work
The result is enhanced cash flow, improved returns, and greater certainty in long-term planning.
Why Cost Segregation Is More Valuable Under 100% Bonus
A cost segregation study identifies portions of a building that qualify for shorter recovery periods (5-, 7-, or 15-year property) instead of the standard 27.5-year (residential) or 39-year (commercial) depreciation schedules.
With permanent 100% bonus depreciation, these reclassified assets can be fully expensed in the year they are placed in service.
1. Larger First-Year Deductions
Assets with a class life of 20 years or less—such as flooring, certain plumbing, electrical work, and land improvements—can be immediately written off, significantly reducing taxable income.
2. Long-Term Planning Certainty
With bonus depreciation no longer subject to scheduled phase-downs, investors can plan acquisitions and improvements without deadline pressure, making it easier to manage multi-property portfolios and capital expenditures.
3. Flexibility and Recapture Planning
Although bonus depreciation is automatic, taxpayers may elect out by asset class. When combined with cost segregation, this allows strategic control over depreciation timing, particularly for properties that may be sold in the near term and subject to depreciation recapture.
When a Cost Segregation Study Makes Sense
Cost segregation is most effective for properties that are newly acquired, constructed, or significantly renovated—but opportunities exist even for older properties.
Common scenarios include:
- After acquisition or construction, to maximize first-year deductions
- After major renovations, such as remodels or system upgrades
- Long-term holds (generally five years or more)
- Missed studies, where taxpayers can file Form 3115 (Change in Accounting Method) to claim a catch-up deduction for previously unclaimed depreciation
Who Should Consider a Study
Cost segregation is often beneficial for owners of rental, commercial, or investment property—particularly those with buildings placed in service within the last 15 years and a depreciable basis of $1 million or more.
Real estate funds, syndicators, and family offices frequently use cost segregation to enhance after-tax returns, demonstrate proactive tax planning, and strengthen investor reporting.
Take the First Step
If you own income-producing real estate, you may be leaving substantial deductions unclaimed.
We’ve created a short self-assessment to help determine whether a cost segregation study could accelerate depreciation and reduce your tax liability.
Take our quick assessment to see if a cost segregation study could save you thousands.
How We Can Help
Our Real Estate team works with investors, developers, and property owners to leverage 100% bonus depreciation through strategic cost segregation studies. We help identify missed opportunities, improve cash flow, and support long-term tax planning objectives.
Contact us to explore how cost segregation can strengthen your real estate tax strategy.