Unlock Thousands
in Tax Savings
with Bonus Depreciation
See how bonus depreciation can unlock tax savings of 10% of your purchase price
Summary: 100% Bonus depreciation is back. If you purchased or renovated your property after 1/19/2025, you qualify for 100% bonus depreciation and significant year 1 tax savings
Cost Seg Example
Purchase price for a short term rental | $1,000,000 |
% allocated to land (not depreciable) | 20% |
| Depreciable basis | $800,000 |
% reclassified into shorter life categories with a cost seg | ~ 25% |
Assets eligible for 100% bonus depreciation with a cost seg | ~ $200,000 |
| Year 1 tax savings at a 37% federal income tax rate with a cost seg | ~ $74,000 |
Higher depreciation → lower taxable income → improved cash flow
Note: This estimate is provided for informational purposes; actual results will depend on the specific features of your property (e.g., quality of the property, condition, year of purchase, renovation work, location, etc)
What Is Bonus Depreciation?
Bonus depreciation is a tax incentive first enacted by Congress in 2001. It is meant to incentivize investment (through the acquisition, renovation, or construction of real estate) and allows owners to deduct the depreciation of qualifying assets in the first year of ownership instead of spreading those depreciation deductions over time. The One Big Beautiful Bill Act ("OBBB" or "OB3") was signed into law on 7/4/2025 and returns bonus depreciation to 100% for properties acquired or construction work performed after 1/19/2025.
How Does Bonus Depreciation Work?
The IRS allows owners of real estate rental properties to use depreciation to offset income, lowering the taxable income, and the taxes you pay each pay. Typically, assets are depreciated over 27.5 or 39 years.
With cost segregation, significant portions of your real estate can be allocated to shorter useful life categories (5, 7, and 15 years) which depreciate more quickly. With bonus depreciation, these tax categories can be fully depreciated in the first year, causing significant increases in first year depreciation and tax savings in the first years of ownership.
Bonus depreciation (technically called the "Special Depreciation Allowance for Qualified Property" by the IRS) is a misleading name and can cause confusion. Bonus depreciation does not create more overall depreciation - instead it further accelerates the depreciation that can be deducted in year 1. "Accelerated depreciation" would probably be a more descriptive name. Bonus depreciation only applies to the components and costs in the shorter life tax categories (i.e., the 5 year, 7 year, and 15 year property).
Depending on when your property was acquired, constructed, and placed into service, you may be eligible to claim up to 100% bonus depreciation. This means you could deduct 100% of the costs of the reclassified components in the shorter life tax categories (i.e., the 5 year, 7 year, and 15 year property) in year 1. So, for example, instead of recognizing those depreciation deductions over 5 years, you will recognize 100% of them in year 1.
Bonus depreciation significantly accelerates your depreciation, increasing the potential tax savings from cost segregation materially.
How do I unlock the savings from bonus depreciation?
Unlocking the savings from bonus depreciation is simple. You need to complete a cost segregation on your property. The purpose of a cost segregation study is to identify and segregate the costs of assets that are eligible for bonus depreciation.
If it is your first year of ownership, you can claim the bonus depreciation on your tax return for that year. If you acquired or constructed the property in a prior year, don't worry, you can always perform a "look back" cost segregation study and and catch up any missed bonus depreciation with your current year tax return.
Our Experience
Nationwide Experience
We have completed cost segs in all 50 states over the last 20 years
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No Studies Rejected
The IRS has accepted 100% of our studies because of our engineering-based methodology and high quality reports
What is my bonus depreciation?
Bonus depreciation has been in existence in many forms since 2001, ranging from 0% to 100% at various times. Determining your bonus depreciation percentage is a multi-step process.
When did you acquire your property (typically, this is the date the transaction closed)? This determines which tax law applies to your property.
- If before 9/28/2017: Please reach out to us for more details.
- If between 9/28/2017 and 1/19/2025: Please see the table below.
- If after 1/19/2025: The applicable bonus depreciation percentage is 100%.
If you acquired your property between 9/28/2017 - 1/19/2025, then the applicable bonus depreciation percentage is based on the date Placed in Service as follows:
| Date Placed in Service | Bonus Depreciation % |
|---|---|
| 9/28/2017 thru 12/31/2022 | 100% |
| 2023 | 80% |
| 2024 | 60% |
| 2025 | 40% |
| 2026 | 20% |
| 2027 | 0% |
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