The recently passed Big Beautiful Bill has made a major change that real estate investors will love – 100% bonus depreciation is back. This means that eligible investors can now write off the entire cost of certain improvements or components of real estate in the first year of ownership, rather than depreciating them slowly over many years. This puts huge amounts of money back into investors’ pockets after they purchase properties, conduct a cost segregation study, and file their taxes.
What is Bonus Depreciation?
Bonus depreciation is a tax incentive that allows investors to accelerate depreciation deductions on qualifying assets. Normally, assets like HVAC systems, appliances, or certain interior improvements are depreciated over 5, 7, or even 15 years. But with 100% bonus depreciation reinstated, these can now be fully deducted in the year they’re placed in service.
Immediate Tax Savings with Cost Segregation and Bonus Depreciation Under the Big Beautiful Bill
Example:
Suppose an investor buys a rental property and a cost segregation study identifies $150,000 worth of components (like lighting, flooring, and appliances) that qualify for accelerated depreciation. Under the Big Beautiful Bill, the investor can now deduct the full $150,000 immediately, rather than spreading it out over a decade or more. This creates instant tax savings and boosts after-tax cash flow.
Why It Matters:
This is a powerful tool for real estate investors looking to maximize deductions, reduce taxable income, and reinvest their savings into new properties. Whether you’re doing value-add renovations or simply acquiring new rental units, a cost segregation study paired with this revived bonus depreciation can unlock significant tax advantages.
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