Is 100% bonus depreciation back for 2025? Yes — permanently, under OBBBA.
Yes. 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 that is both acquired and placed in service after January 19, 2025. Property acquired before that date stays on the old TCJA phase-down — 80% for 2023, 60% for 2024, 40% for the first nineteen days of 2025 — even if it is placed in service later. For a cost segregation study, that means everything reclassified into 5-, 7- or 15-year property on a post-cutoff purchase is deductible in Year 1.
For 2026: see Bonus depreciation 2026 for the 2026 rate table, the 20% rate on pre-January 20, 2025 acquisitions, and the 2026 Section 179 limits.
Yes. The One Big Beautiful Bill Act (Pub. L. 119-21, signed July 4, 2025) permanently restored 100% bonus depreciation under IRC §168(k) for qualified property both acquired and placed in service after January 19, 2025. Property acquired earlier keeps the TCJA phase-down rate for its placed-in-service year: 80% for 2023, 60% for 2024, 40% for January 1–19, 2025. A Form 3115 catch-up on an earlier purchase uses that earlier rate, not today's 100%.
| 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 |
| Jan 1–19, 2025 | 40% | Final pre-OBBBA phase-down bucket, still under the old TCJA schedule |
| After Jan 19, 2025 | 100% | Permanently restored under OBBBA (Pub. L. 119-21, signed July 4 2025) — but only for property BOTH acquired and placed in service after January 19, 2025 |
| 2026 (pre-cutoff acquisitions) | 20% | Property acquired before January 20, 2025 but placed in service in 2026 stays on the OLD phase-down schedule, not the new 100% rate |
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:
- $500,000 single-family rental (20% land, $400,000 depreciable basis), 15% reclassification → $60,000 at 100% bonus plus $12,400 of 27.5-year straight line ≈ $72,400 Year-1 federal depreciation, versus about $14,500 with straight-line only
- $1,500,000 small commercial (25% land, $1,125,000 depreciable basis), 22% reclassification → $247,500 at 100% bonus plus $22,500 of 39-year straight line ≈ $270,000 Year-1, versus about $28,800 with straight-line only
- $685,000 furnished STR (20% land, $548,000 depreciable basis), 26% reclassification including furnishings → $142,500 at 100% bonus plus $14,700 of 27.5-year straight line ≈ $157,200 Year-1, versus about $19,900 with straight-line only
The reclassification percentages are our representative results by property type (single-family rentals typically land in the 8–32% band, furnished short-term rentals 19–39%, small commercial 18–34%); your study's number depends on the property. Year-1 figures use a full year of straight line on the building for simplicity; the mid-month convention trims the first year depending on the month the property is placed in service. Illustrative estimates, not tax advice.
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 both acquired and placed in service after January 19, 2025. Property acquired before that date generally stays on the prior TCJA phase-down even if placed in service later. The restoration is permanent under current law for property that meets the acquisition-date test — 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?
Qualified property generally receives 100% bonus depreciation if it was acquired and placed in service after January 19, 2025. Property acquired before January 20, 2025 generally remains subject to the prior TCJA phase-down based on its placed-in-service year — 80% for 2023, 60% for 2024, 40% for January 1–19, 2025, and 20% for 2026 — even if it's placed in service later than 2025. For cost segregation lookback studies (Form 3115 §481(a) catch-up), the depreciation calculation generally uses the bonus rules that applied when the property was originally placed in service, rather than the current 100% rate.
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 $500,000 single-family rental (20% land, so $400,000 of depreciable basis) with a typical 15% reclassification, about $60,000 is bonus-eligible, for roughly $72,400 of Year-1 federal depreciation at 100% bonus versus about $14,500 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 both acquired and placed in service after January 19, 2025. Property acquired before that date remains on the TCJA phase-down schedule regardless of when it's placed in service.
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 property acquired before January 20, 2025, the catch-up applies the bonus rate in effect for the original placed-in-service year (40% for January 1–19, 2025, 60% for 2024, 80% for 2023, 100% for 2017–2022) — not today's 100% rate. 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, for example, requires you to add back 100% of the federal §168(k) deduction on the Illinois return in the year taken (35 ILCS 5/203(a)(2)(D-15), reported on Form IL-4562), then subtract it back over the asset's regular depreciation life; from tax year 2026 the addback also covers §168(n). California, New York, New Jersey and others also require state add-backs. The federal Year-1 deduction is unaffected, but state treatment varies: check our state-by-state conformity chart and verify with your CPA before relying on bonus depreciation for state planning purposes.