OBBB Strategy: 100% Bonus Depreciation Is Back — Cost Segregation Just Got a Whole Lot More Valuable

With 100% bonus depreciation officially back under the new tax law, real estate investors have a powerful incentive to revisit cost segregation studies — especially for properties placed in service after January 19, 2025.

This change creates an opportunity to front-load depreciation deductions in a way that offsets passive income, or even ordinary income if you qualify as a real estate professional.

What’s Bonus Depreciation?

Bonus depreciation allows you to immediately deduct the cost of qualifying property — rather than spreading the deduction out over decades.

Under the new law:

  • 60% bonus applies to assets placed in service January 1–19, 2025

  • 100% bonus applies to assets placed in service after January 19, 2025

  • Applies to components with a useful life of 20 years or less (think: flooring, cabinets, wiring, HVAC zones, appliances, etc.)

Why Cost Segregation Matters More Than Ever

Without a cost segregation study, most commercial and residential rental property is depreciated over:

  • 27.5 years (residential rental)

  • 39 years (commercial property)

But with a properly performed cost segregation analysis, you can break out components like:

  • Carpets, flooring, wall coverings

  • Landscaping, parking lots, fencing

  • Electrical and plumbing systems tied to equipment

These shorter-lived assets (5, 7, or 15 years) can now be fully deducted in year one under bonus depreciation — as long as they were placed in service after Jan 19.

Strategy: Pair Bonus Depreciation with Passive Income or REP Status

Here’s where it gets powerful:

  • If you’re a passive investor, bonus depreciation can offset other passive income — rental income, K-1s, etc.

  • If you’re a real estate professional, it can offset any income — including wages or business income.

That makes a cost segregation study one of the most tax-efficient moves you can make in 2025–2026 if you’re acquiring, building, or renovating.

Real Example

You purchase a $1.2M residential rental in February 2025. With a cost segregation study, you identify:

  • $150,000 in 5-year property (appliances, flooring)

  • $50,000 in 15-year property (land improvements)

Under 100% bonus depreciation:

  • You deduct $200,000 immediately in 2025

  • That deduction offsets passive income — or all income if you’re a REP

Without cost segregation, that same $200K would be spread over decades.

Final Thoughts

The return of full bonus depreciation means it’s time to:

  • Review acquisitions made after Jan 19

  • Consider a cost seg study for any property over ~$500,000

  • Maximize deductions while they're available (the provision is permanent — but tax rates and REP rules could change)

Want help modeling the benefit or reviewing your eligibility as a real estate professional? Let’s talk. This is one of the most powerful planning tools available right now.