Key Takeaways:
- The One Big Beautiful Bill Act permanently restores 100% bonus depreciation, creating new opportunities for real estate investors to accelerate deductions and boost cash flow.
- Pairing cost segregation with 100% bonus depreciation allows you to reclassify assets for immediate write-offs and greater flexibility in long-term tax planning.
- Property owners, funds, and family offices with recently acquired or improved real estate can use cost segregation studies to uncover significant, often-overlooked tax savings.
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The return of 100% bonus depreciation under the One Big Beautiful Bill Act (OBBBA) has changed the game for real estate investors. What was once a time-limited incentive under the Tax Cuts and Jobs Act (TCJA) is now permanent — and that means your opportunity to maximize deductions and cash flow just got a lot bigger.
If you own rental, commercial, or investment property, now is the time to revisit your depreciation strategy — and cost segregation could be one of the most powerful tools available to you.
100% Bonus Depreciation Is Here to Stay
When the TCJA first introduced 100% bonus depreciation in 2017, it was designed to phase down gradually starting in 2023 — dropping to 40% by 2025 and disappearing completely by 2027.
Now, under OBBBA, that phase-down has been reversed. Bonus depreciation is permanently restored at 100% for qualified property acquired and placed in service after January 19, 2025.
This means you can deduct the full cost of eligible improvements — such as lighting, flooring, plumbing, land improvements, and interior upgrades — the year they’re placed in service. That’s a major boost for cash flow, long-term planning, and return on investment.
Why 100% Bonus Depreciation Makes Cost Segregation More Valuable
With 100% bonus depreciation back for good, cost segregation studies have become even more impactful. These studies break down a property into its individual components and identify which costs can be depreciated over shorter timeframes (5, 7, or 15 years) instead of the standard 27.5 or 39 years.
Here’s why that matters now more than ever:
1. Bigger Upfront Deductions Mean Stronger Cash Flow
Cost segregation reclassifies parts of your building that have a class life of 20 year or less— like , plumbing fixtures, land improvements, flooring, and electrical work — into shorter asset lives. Combined with 100% bonus depreciation, those reclassified assets can be fully written off the year they’re placed in service. The result? Immediate, substantial deductions that can reduce your tax bill and free up cash for future acquisitions or improvements.
2. Permanent Rules Let You Plan with Confidence
Previously, many investors rushed to complete projects before bonus depreciation phased down. Now that 100% is here indefinitely, you can plan property improvements and acquisitions without the pressure of changing deadlines. That consistency makes it easier to map out long-term capital planning, particularly if you’re managing multiple properties or large real estate portfolios.
3. Cost Segregation Unlocks Flexibility and Control
While bonus depreciation is automatic, you can still choose to elect out by asset class if you’re planning to sell soon and want to manage depreciation recapture. Pairing that flexibility with cost segregation allows you to fine-tune your strategy — taking larger deductions now or deferring them based on your investment goals.
When (and Why) You Should Do a Cost Segregation Study
Cost segregation is most valuable when you have a newly acquired, constructed, or renovated property — but there’s flexibility even if the property has been in service for years.
Ideal times to consider a cost segregation study include:
- After acquisition or construction: If you’ve recently purchased or developed a property, a study can immediately accelerate depreciation and improve your first-year cash flow.
- After significant renovations: Even if you’ve owned a building for a while, major upgrades like interior remodels, new landscaping, or system overhauls can make a study worthwhile.
- For long-term holds: Investors who plan to hold properties for at least five years often see the greatest benefit.
- For missed opportunities: If you didn’t perform a study when you placed the property in service, you can still file a change in accounting method (Form 3115) to claim a “catch-up” deduction — recovering all missed depreciation in the current year.
Who Should Consider a Study
Owners of rental, commercial, or investment property — especially those with buildings placed in service within the last 15 years — should evaluate whether a cost segregation study makes sense.
The benefits often outweigh the costs, particularly for properties with a depreciable basis of $1,000,000 or more.
Real estate funds, syndicators, and family offices can also leverage cost segregation to enhance portfolio performance and demonstrate proactive tax planning to investors. In a competitive market, that can be a differentiator for raising capital and communicating value.
Take the First Step
Are you leaving money on the table? If you own rental, commercial, or investment property, you may be missing out on significant tax savings.
We created a quick self-assessment to help you determine if a cost segregation study could reduce your tax burden and accelerate depreciation:
Take our quick assessment to see if a cost segregation study could save you thousands.
This tool helps property owners and investors quickly evaluate their eligibility and potential benefit. It takes just a few minutes to complete and provides a clear next step for those ready to explore their options.
How MGO Can Help
Our Real Estate team helps developers, investors, and property owners leverage the full value of 100% bonus depreciation through strategic cost segregation studies. We can help you uncover missed opportunities, improve cash flow, and strengthen your long-term financial position.
Reach out today to explore how a cost segregation study could transform your real estate tax strategy.