If you're a real estate investor or business owner, you've likely heard about the powerful tax benefits of 100% bonus depreciation. This incentive allowed property owners to deduct the full cost of qualifying assets in the year they were placed in service—resulting in massive upfront tax savings. But as of now, it’s being phased out.
So, is 100% bonus depreciation coming back? Could it be extended or restored by new legislation? And how does it tie into strategies like cost segregation?
Let’s break it all down.
What Is Bonus Depreciation?
Bonus depreciation allows taxpayers to write off a percentage of the cost of eligible business property in the year the asset is placed in service, rather than spreading it out over time. Under the Tax Cuts and Jobs Act (TCJA) of 2017, bonus depreciation was increased to 100% for qualifying assets placed in service between September 27, 2017, and December 31, 2022.
How Bonus Depreciation Supports Cost Segregation
Here’s where bonus depreciation and cost segregation work hand in hand.
A cost segregation study reclassifies certain parts of a building (like lighting, flooring, landscaping, and cabinetry) into shorter depreciation categories—typically 5, 7, or 15 years. Once reclassified, these assets become eligible for bonus depreciation.
With 100% bonus depreciation in place, many of the reclassified assets from a cost segregation study could be fully deducted in year one. This created enormous first-year tax savings for property owners.
Even at 80% or 60%, bonus depreciation still offers a substantial deduction when paired with cost segregation.
Is 100% Bonus Depreciation Coming Back?
The Current Outlook
As of mid-2025, no legislation has officially reinstated 100% bonus depreciation, but there is growing political and industry interest in restoring it.
Several lawmakers and business groups have advocated for extending or making 100% bonus depreciation permanent. The argument is simple: bonus depreciation fuels business investment, promotes development, and stimulates the economy.
Key Factors That Could Influence Its Return:
- Changes in Congress after the next election
- Economic downturns that prompt pro-investment tax relief
- Bipartisan support for pro-business provisions in future tax bills
- Real estate and manufacturing lobbying efforts
While there’s no guarantee, it remains a live topic in tax reform discussions—and something investors should watch closely.
What You Can Do Now
Even without full 100% bonus depreciation, cost segregation remains a highly effective strategy for accelerating deductions and improving cash flow. Here’s why:
- Bonus depreciation still applies (though at lower percentages)
- Section 179 expensing may be available for certain assets
- Shorter-life assets still allow faster depreciation even without bonus treatment
- Retroactive studies can produce large one-time deductions using catch-up depreciation
Tips for Property Owners:
- If you’re acquiring or improving a property in 2025, consider conducting a cost segregation study now to take advantage of the remaining 40% bonus depreciation.
- Monitor tax policy developments. If bonus depreciation is extended, you’ll want to act quickly to benefit.
- Coordinate with your CPA and cost segregation provider to develop a long-term depreciation strategy based on your projected income and hold period.
Final Thoughts
While 100% bonus depreciation is not currently in effect, it may return through future legislation. Even in its reduced form, it remains a valuable tool—especially when paired with cost segregation.
If you're planning a property purchase, renovation, or have existing real estate assets, now is the time to explore how cost segregation and bonus depreciation can work together to reduce your tax liability and free up capital for reinvestment.
Stay informed, stay strategic—and stay ready in case this powerful tax incentive makes a comeback.