Mechanics

Cost segregation without bonus depreciation.

The 30-second answer

Cost segregation still works without bonus depreciation. Bonus depreciation accelerates reclassified components into a single Year-1 deduction, but even without it, moving basis from a 27.5- or 39-year schedule into 5-, 7-, and 15-year MACRS dramatically front-loads your deductions. The benefit is smaller and spread over a few years instead of all in Year 1, but a study still pays off, especially via the time value of money and on a Form 3115 lookback. (Note: 100% bonus is currently in effect under §168(k) for property placed in service after January 19, 2025.)

How it works without bonus

Bonus depreciation is the accelerator on top, not the engine. The engine is the reclassification itself:

  • Without a study, a component depreciates over 27.5 or 39 years, a few percent a year.
  • With a study but no bonus, that same component depreciates over 5, 7, or 15 years under regular MACRS, several times faster.
  • With a study and bonus, the component is deducted 100% in Year 1.

So even at 0% bonus, a 5-year component is being written off roughly 5x to 7x faster than if it sat in the building's 39-year class. The deduction is spread over the first several years instead of landing entirely in Year 1, but it is still a large acceleration over doing nothing.

When this matters

  • Phase-down years. For property placed in service in 2023 (80% bonus) or 2024 (60% bonus), the non-bonus portion still depreciates on the accelerated MACRS schedule. A study captures both.
  • States that decouple from bonus. Many states do not allow §168(k) bonus but do follow regular MACRS, so the study still accelerates your state depreciation even where bonus is added back.
  • Future law changes. If federal bonus is ever reduced again, cost segregation keeps working on the MACRS acceleration alone.

Because bonus rates change with the placed-in-service year, your study assigns the correct rate per component. See the bonus depreciation hub for current rules, or estimate your number on the calculator.

Frequently asked

Does cost segregation work without bonus depreciation?

Yes. Bonus depreciation accelerates reclassified components into Year 1, but the underlying benefit is the reclassification itself: moving basis from a 27.5- or 39-year schedule into 5-, 7-, and 15-year MACRS. Even at 0% bonus, those components depreciate several times faster than they would inside the building's long-life class, so a study still front-loads deductions meaningfully.

Is cost segregation still worth it if bonus depreciation is reduced?

Usually yes. Without bonus, the benefit is spread over the first several years instead of landing all in Year 1, but the acceleration over a 27.5- or 39-year schedule is still large, and the time value of money favors the front-loaded deductions. The ROI is lower than with 100% bonus but typically still positive on a property of meaningful basis.

Do states without bonus depreciation still benefit from cost segregation?

Yes. Many states decouple from federal §168(k) bonus but still follow regular MACRS. In those states, the federal return gets bonus while the state return gets the accelerated MACRS depreciation from the reclassification, so the study helps on both sides, just computed separately by your CPA.

Is bonus depreciation available right now?

Yes. 100% bonus depreciation is in effect under IRC §168(k) for qualifying property acquired and placed in service after January 19, 2025. This page covers the scenario where bonus is reduced or unavailable (older placements, decoupled states, or potential future law changes), where cost segregation still works on the MACRS acceleration alone.

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