100% bonus depreciation is permanently restored for 2025+. See how much you can deduct in Year 1 when you pair bonus depreciation with a cost segregation study.
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100% bonus depreciation is permanently restored under the One Big Beautiful Bill Act (July 2025)
Bonus depreciation under IRC §168(k) allows you to deduct the full cost of qualifying assets in the year they are placed in service. But here's the thing: a building itself (the structural shell) is classified as 27.5-year or 39-year property and doesn't qualify for bonus depreciation. That's where cost segregation comes in.
A cost segregation study identifies the components of your building that can be reclassified into shorter MACRS recovery periods: 5-year personal property (appliances, flooring, cabinetry, light fixtures), 7-year property (specialized equipment), and 15-year land improvements (landscaping, driveways, parking lots, fencing). All three classes qualify for 100% bonus depreciation.
Without cost segregation, you'd depreciate $400K (80% basis after land) over 27.5 years — about $14,500/year. With a cost segregation study, roughly 18% of your basis ($72K) gets reclassified into accelerated classes. Under 100% bonus depreciation, that entire $72K is deductible in Year 1. At a 37% tax bracket, that's $26,640 in cash tax savings — from a study that costs $795.
You don't need to have purchased your property this year. If you've been depreciating straight-line for years, you can file a cost segregation study retroactively using IRS Form 3115 (change of accounting method). This lets you claim all the previously missed accelerated depreciation in a single tax year — no amended returns needed.
Based on a $500,000 rental property at the 37% tax bracket
| Standard Depreciation | With Cost Seg + Bonus | |
|---|---|---|
| Depreciable Basis | $400,000 | $400,000 |
| Year-1 Deduction | $14,545 | $86,545 |
| Additional Year-1 Deduction | — | $72,000 |
| Year-1 Tax Savings (37%) | $5,382 | $32,022 |
| Study Cost | $0 | $795 |
| Net Benefit | $5,382 | $31,227 |
Bonus depreciation under IRC §168(k) allows property owners to deduct the full cost of qualifying assets in the year they are placed in service, rather than spreading deductions over 5, 7, or 15 years. When combined with a cost segregation study, property owners can deduct 20–35% of their building's depreciable basis in Year 1.
Yes. The One Big Beautiful Bill Act (signed July 2025) permanently restored 100% bonus depreciation for property placed in service in 2025 and beyond. The phase-down that reduced bonus depreciation to 80% in 2023 and 60% in 2024 has been fully reversed.
Any tangible property with a MACRS recovery period of 20 years or less qualifies. Through a cost segregation study, components of a building — flooring, cabinetry, appliances, landscaping, electrical, plumbing fixtures, driveways — are reclassified into 5, 7, or 15-year recovery periods, making them eligible for 100% bonus depreciation.
Yes. If you've been depreciating your property using standard straight-line depreciation, you can file a cost segregation study and use IRS Form 3115 to claim all previously missed accelerated depreciation in a single year. No amended returns needed.
A cost segregation study identifies building components that qualify for shorter depreciation periods. With 100% bonus depreciation, the entire reclassified amount is deductible in Year 1. For example, on a $500K rental, a cost seg study might reclassify $72K into accelerated classes — all deductible immediately instead of over 27.5 years.
When you sell the property, the IRS recaptures accelerated depreciation at a maximum 25% rate (Section 1250). However, the time value of receiving the full deduction now far outweighs the future recapture cost. A 1031 exchange can defer recapture indefinitely. Your CPA can model the full lifecycle economics for your situation.