Is Bonus Depreciation Permanent? What the OBBBA Means for 2025 and Beyond

For nearly two years, real estate investors watched 100% bonus depreciation slip away. The Tax Cuts and Jobs Act of 2017 introduced full expensing for qualifying property, but it came with a built-in phase-down: 80% in 2023, 60% in 2024, 40% in 2025, and so on until it reached zero. That phase-down made cost segregation less impactful and left investors wondering whether to wait or act.

That uncertainty ended in July 2025. The One Big Beautiful Bill Act restored 100% bonus depreciation for property placed in service in 2025 and beyond—and this time, there's no phase-down schedule. No sunset clause. The provision is permanent under current law.

Here's what that means for property investors and how it affects the economics of cost segregation.

A Brief History of Bonus Depreciation

Bonus depreciation has been part of the tax code in various forms since 2001, but it became especially relevant to real estate investors in 2017. Here's the timeline:

The OBBBA permanently restored the full first-year deduction that made cost segregation one of the most impactful tax strategies available to property investors.

What "Permanent" Actually Means in Tax Law

In tax legislation, "permanent" means there is no built-in expiration date. Unlike the TCJA's bonus depreciation provision—which was enacted with a specific phase-down schedule—the OBBBA's restoration has no sunset clause. It's written as a permanent change to IRC §168(k).

That said, "permanent" doesn't mean "forever." Congress can change any tax provision at any time through new legislation. The 2017 TCJA itself was supposed to run through 2026 before the phase-down, and many of its provisions have been modified by subsequent legislation. Tax law is inherently political, and future Congresses may have different priorities.

What "permanent" does mean in practical terms is this: you don't need to time your property purchases or cost segregation studies around an expiring deadline. Under the TCJA phase-down, there was a real cost to waiting—every year you delayed, the bonus rate dropped 20 points. That pressure is gone. Whether you place property in service in 2026, 2028, or 2032, the bonus rate is 100% under current law.

How This Affects Cost Segregation Economics

The impact is simple: 100% bonus depreciation makes cost segregation produce its maximum possible Year 1 tax benefit. Every dollar reclassified from the default 27.5-year or 39-year schedule into a 5-year, 7-year, or 15-year category is fully deductible in the first year.

With 100% bonus depreciation permanent, every dollar reclassified through cost segregation can be deducted in full in Year 1.

Here's what the numbers look like at different bonus rates for a $600,000 depreciable basis with 25% reclassification ($150,000 in reclassified components):

The difference between 60% and 100% bonus is $22,200 in federal tax savings on this single property. That's the cost of the phase-down that was in effect during 2024. For investors who delayed purchases or studies during 2023–2024 waiting for the restoration, the wait paid off: they now get the full benefit.

For typical reclassification rates by property type, see our benchmark data. STRs with full furnishings typically see 30–34% of depreciable basis reclassified; unfurnished SFRs around 17–18%; commercial properties 28–35% depending on the specific use.

Should You Wait or Act Now?

This is the most common question we hear, and the answer is clear: there is no benefit to waiting.

Under the old phase-down schedule, there was a mathematical argument for timing: if you expected legislation to restore 100%, delaying a cost seg study until the higher rate took effect could increase your Year 1 deduction. That logic no longer applies. The rate is 100% today and it will be 100% next year under current law.

Meanwhile, every year you delay a cost seg study is a year of tax savings you don't capture. A property owner with a $500,000 rental who waits 12 months to order a study loses roughly $15,000–$25,000 in first-year tax benefit (depending on property type and tax bracket) that could have been claimed on the current year's return.

If you already own rental or commercial property and haven't done a cost segregation study, the timing is straightforward: order the study before your next tax filing deadline. Your CPA files a Form 3115 (Change of Accounting Method) to claim the catch-up depreciation, and you receive the full benefit in the current tax year. No amended returns needed for the catch-up—it's a prospective filing.

For a comparison of how cost segregation relates to other depreciation provisions, see our guide on Section 179 vs. bonus depreciation.

With the rate locked at 100%, the only cost of waiting is the tax savings you miss in the current year.