100% bonus depreciation is permanent under OBBBA.
The One Big Beautiful Bill Act (Pub. L. 119-21, signed July 4, 2025) permanently restored 100% bonus depreciation under IRC §168(k) for qualifying property placed in service after January 19, 2025. No further scheduled phase-down.
| Tax year | Bonus rate | Status |
|---|---|---|
| 2017 | 100% | TCJA (Tax Cuts and Jobs Act, Pub. L. 115-97) restored 100% bonus for new and used property |
| 2018–2022 | 100% | Full bonus continues — peak cost segregation Year-1 benefit |
| 2023 | 80% | First TCJA step-down — bonus phasedown begins |
| 2024 | 60% | Second step-down — until OBBBA reversed it retroactively |
| 2025 | 100% | Permanently restored under OBBBA (Pub. L. 119-21, signed July 4 2025). Applies to property placed in service after January 19 2025. |
| 2026+ | 100% | Permanent under current law |
Source: IRC §168(k); Tax Cuts and Jobs Act (Pub. L. 115-97); One Big Beautiful Bill Act (Pub. L. 119-21).
What this means for your property
With 100% bonus depreciation permanent, every dollar a cost segregation study reclassifies from the 27.5- or 39-year structure bucket into a bonus-eligible 5-, 7-, or 15-year class becomes fully deductible in Year 1. The math:
- $500K residential rental, 22% reclassification → ~$87,000 Year-1 federal deduction at 100% bonus, versus ~$15,000 with straight-line only
- $1.5M small commercial, 28% reclassification → ~$378,000 Year-1 deduction at 100% bonus
- $685K furnished STR, 28% reclassification + FF&E → ~$165,000 Year-1 deduction, all bonus-eligible
The structural portion (27.5/39-year) keeps depreciating on its standard schedule alongside. Cost segregation doesn't change the lifetime depreciation total — it accelerates the timing. With 100% bonus permanent, that acceleration is at its maximum economic value.
Frequently asked
Is 100% bonus depreciation back in 2025?
Yes. The One Big Beautiful Bill Act (OBBBA, Pub. L. 119-21, signed July 4, 2025) permanently restored 100% bonus depreciation under IRC §168(k) for qualifying property placed in service after January 19, 2025. The restoration is permanent under current law — no further scheduled step-down.
What property qualifies for 100% bonus depreciation?
Property with a MACRS recovery period of 20 years or less, including most cost-segregation reclassifications (5-year personal property, 15-year land improvements, qualified improvement property under IRC §168(e)(6)). The structural component of buildings (27.5-year residential, 39-year nonresidential) does NOT qualify for bonus — that's the whole reason cost segregation matters: it pulls eligible components out of the long-life structure bucket into bonus-eligible classes.
What's the cutoff date for 100% bonus?
Property placed in service after January 19, 2025 gets 100%. Property placed in service January 1, 2024 through January 19, 2025 falls under the TCJA phase-down (60%). Cost segregation lookback studies (Form 3115 §481(a) catch-up) on pre-2025 property apply the bonus rate that was in effect in the original placed-in-service year.
Does cost segregation still make sense with 100% bonus depreciation?
Yes — more so than during the phase-down years. With 100% bonus permanent, every dollar a study reclassifies from the 27.5- or 39-year structure into bonus-eligible 5-, 7-, or 15-year property becomes fully deductible in Year 1. On a $500K residential rental with a 22% reclassification, that's roughly $87,000 of Year-1 federal deduction at 100% bonus versus ~$15,000 of straight-line depreciation without a study. The whole point of cost segregation is maximizing the bonus-eligible bucket.
What is IRC §168(k)?
Internal Revenue Code §168(k) is the federal bonus depreciation provision. It allows taxpayers to deduct a specified percentage of the cost of qualifying property in the year placed in service, with the remaining basis depreciated normally over the asset's MACRS recovery period. TCJA temporarily set the rate at 100% (2017–2022), with phase-down to 0% by 2027; OBBBA permanently restored it to 100% effective for property placed in service after January 19, 2025.
Does 100% bonus depreciation apply to used property?
Yes — TCJA expanded bonus eligibility to acquired-used property, and OBBBA preserved that expansion. As long as (1) the taxpayer didn't previously use the property, (2) the property wasn't acquired from a related party, and (3) it has the qualifying recovery period (≤20 years), used property qualifies for 100% bonus. This is critical for cost-seg buyers acquiring existing rental properties.
What about Form 3115 §481(a) catch-up on prior-year property?
Form 3115 (Application for Change in Accounting Method) is the mechanism for claiming missed depreciation on property placed in service in a prior year. The §481(a) adjustment recovers all missed deductions in a single year. For pre-2025 property, the catch-up applies the bonus rate in effect for the original placed-in-service year (60% for 2024, 80% for 2023, 100% for 2017–2022). No amended returns required; automatic-consent change under Rev. Proc. 2015-13.
Does state tax law follow federal bonus depreciation?
Inconsistently. Many states decouple from federal bonus depreciation — Illinois, California, New York, New Jersey, and others require addback adjustments on their state returns. The federal Year-1 deduction is permanent and clean, but state treatment varies. Verify with your CPA before relying on bonus depreciation for state planning purposes.