Bonus depreciation and the OBBBA law

Bonus depreciation lets you deduct certain property in full, right away, instead of spreading the write-off over years. For a while it was fading. The old law was phasing it down each year, and it was headed to zero.

Then came the One Big Beautiful Bill Act, signed in July 2025. Most people call it the OBBBA. It brought 100% bonus depreciation back. And this time there is no phase-down and no expiration date.

The two dates that matter

To get the full 100% rate, your property has to clear two tests, not one:

• Acquired after January 19, 2025. This is when you bought it. And here is the catch: if you signed a binding contract earlier, the IRS can treat the contract date as your acquisition date.
• Placed in service after January 19, 2025. This is when the property was ready and available for use, like the day a rental was ready for guests or tenants.

Your acquisition date and your contract date matter. We check both as part of every study, so your report uses the rate the law actually gives you.

What if my dates fall earlier in 2025?

Property that misses the new rule usually does not lose bonus. It stays on the old phase-down schedule instead. If you acquired the property on or before January 19, 2025, or you were locked in under a binding contract signed by then, the old phase-down still applies: 40% bonus for most property placed in service in 2025, and 20% if it slips to 2026. After 2026, the old schedule drops to zero.

This is why two owners who closed a few weeks apart in early 2025 can get very different first-year deductions. The dates decide it, not the calendar year alone.

Both dates have to land after January 19, 2025. Your contract date counts too.

How bonus works with cost segregation

Here is the part many owners miss. Bonus depreciation only applies to property with a tax life of 20 years or less. A building by itself does not qualify. Rentals sit on a 27.5-year schedule and commercial buildings on a 39-year schedule, and neither gets bonus.

A cost segregation study is what unlocks it. The study finds the parts of your building that belong on 5, 7, and 15-year schedules: carpet, appliances, cabinets, special wiring, paving, fencing, landscaping, and more. Those short-life parts do qualify for bonus. The building shell, the roof, and the walls do not.

An example

Say you buy a $500,000 rental and a study finds $120,000 of short-life parts on 5, 7, and 15-year schedules.

• If you qualify for 100% bonus, you can deduct the full $120,000 in year one.
• If your dates put you in the 40% group, year one bonus is $48,000. The rest is not lost. It still comes back to you over the 5, 7, and 15-year schedules, just more slowly.

Either way, the study beats doing nothing. Without it, that same $120,000 would trickle out over 27.5 or 39 years.

One honest note: recapture when you sell

Fast deductions are not free money forever. When you sell the property, the IRS can tax back part of the depreciation you took. This is called recapture, and on short-life parts it is usually taxed as regular income.

That does not erase the benefit. You still get the tax savings up front, which is when a dollar helps you most. And many owners plan around recapture, for example by holding long term or using a 1031 exchange. Talk to your tax advisor about how a sale would play out for you.

Bought before 2025? You are not left out

If you have owned your property for years and never did a study, you can still catch up on missed depreciation with Form 3115. No amended returns needed. The catch-up uses the rules that applied in your purchase year, and we handle that math inside the study.

This guide explains general tax ideas in plain words. It is not tax advice for your situation. The bonus depreciation rules turn on exact dates, contract terms, and property facts. Your study and tax positions are reviewed by a licensed tax professional. Always confirm the plan with your own advisor before you file.