Bonus Depreciation Is Back at 100%: What It Means for Real Estate Investors
The One Big Beautiful Bill Act (OBBBA) permanently restored 100% bonus depreciation. For real estate investors, this is a game-changer.
What Is Bonus Depreciation?
Bonus depreciation lets you deduct the full cost of certain assets in the year you place them in service, instead of spreading the deduction over several years.
In real estate, this often applies to items identified in a cost segregation study: flooring, fixtures, appliances, and landscaping, etc.
Why 100% Matters
From 2017 through 2022, bonus depreciation was at 100%, but it started phasing down. Many investors thought that window had closed. OBBBA made 100% bonus depreciation permanent.
That means:
Bigger upfront deductions: You no longer wait years to recover costs.
Immediate cash flow: Keep more money in your pocket today.
Stronger reinvestment potential: Use tax savings to fund the next deal faster.
Example: $500,000 Rental Property
Land value (non-depreciable): $100,000
Building value: $400,000
Short-lived assets reclassified via cost seg: ~$100,000
With 100% bonus depreciation, you can deduct that $100,000 in year one, instead of over 5, 7, or 15 years.
That’s in addition to the regular $10,900/year you’ll still get from the remaining building value.
Year-End Planning Tip
Bonus depreciation works best when you plan ahead:
Schedule cost segregation studies early (waiting until December can mean missing the deadline).
Match deductions to income: Big year for rental profits? A large bonus depreciation deduction could offset them.
Don’t forget STR loophole or REPS: These statuses determine whether you can use losses to offset non-passive income.
Bonus depreciation at 100% isn’t just about reducing taxes — it’s about accelerating your portfolio growth. By front-loading deductions, you improve cash flow and reinvest faster.
If you purchased or plan to purchase property in 2025, now is the time to look at cost segregation and bonus depreciation strategies before year-end.