100% Bonus Depreciation Is Back: What It Means for Real Estate Investors
- shaybachelder
- Jul 8
- 3 min read
Big news in the tax world: 100% bonus depreciation has officially been reinstated—and it’s here to stay.
If you own or are thinking about buying investment property, this change could have a major impact on your tax strategy. Here’s a simple overview of what this means and how you can potentially benefit.
What Is Bonus Depreciation?
Normally, when you buy a property, you have to spread out (depreciate) the cost over 27.5 years for residential rentals or 39 years for commercial buildings and short term rentals.
Bonus depreciation lets you take a much larger deduction right away.
With 100% bonus depreciation back in place, you can immediately deduct the full cost of certain parts of a property in the first year you put it into service. This can dramatically reduce your taxable income.
What Types of Property Qualify?
In real estate, it generally applies to:
✅ Personal Property Inside the Rental
These are non-structural components that can be removed without significant damage:
Appliances
Furniture
Carpeting and flooring
Window coverings
Certain fixtures
Equipment
These items usually have a 5- or 7-year depreciable life—and that’s what makes them eligible for 100% bonus depreciation.
✅ Land Improvements
These are improvements to the land itself (but not the land—land is never depreciable):
Parking lots
Landscaping
Sidewalks
Fencing
Outdoor lighting
Land improvements typically have a 15-year life and qualify for bonus depreciation as well.
✅ Qualified Improvement Property (QIP)
This refers to certain improvements you make to the interior of a building you already own (after it’s placed in service):
Interior non-structural upgrades
Interior walls, ceilings, lighting
HVAC, plumbing, electrical (interior improvements only)
Important: QIP does not include:
Enlarging the building
Elevators and escalators
Changes to the building’s structural framework
How Does This Work?
Here’s where cost segregation comes in.
A cost segregation study breaks down your property into different categories—like personal property, land improvements, and the building itself.
Many of these components (carpeting, appliances, specialty lighting, landscaping) can be depreciated over 5, 7, or 15 years instead of 27.5 or 39.
With 100% bonus depreciation, you can now deduct all of those shorter-lived components immediately in year one.
Why Does This Matter?
Let’s say you purchase an Airbnb rental property for $500,000. A cost segregation study might reveal that $150,000 of that cost is eligible for shorter depreciation periods.
Under the old rules (40% bonus depreciation), you would have received about $60,000 in first-year deductions. Now, you can deduct the entire $150,000 upfront.
This massive deduction could:
Reduce your taxable income significantly
Free up cash flow you can reinvest
Help you pay down debt faster
Improve your return on investment
Who Should Consider This?
If you own or are planning to acquire:
Airbnb or VRBO short-term rentals
Multifamily rentals
Office buildings
Retail or industrial properties
…it’s worth exploring whether a cost segregation study makes sense for you.
Even if you’ve already placed property in service after January 19th, 2025, you’re eligible to claim 100% bonus depreciation under the new rules.
My Recommendation
If you’re interested in learning how much you could save, I recommend working with Engineered Tax Services. They specialize in cost segregation and can help you identify and document qualifying assets to maximize your deduction.
Feel free to reach out to me if you’d like a personal introduction or want to discuss whether this strategy fits into your overall tax plan.
If you have questions about how 100% bonus depreciation could benefit your specific situation, let’s set up a time to talk. Tax laws are always evolving, but smart planning can help you stay ahead—and keep more of your money working for you.
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