Cost Segregation is known to be a tax incentive that allows businesses to deduct the cost of assets that qualify over a short life depreciation schedule. It accelerates tax deductions, which can lower taxable income and improve cashflow, and it applies to both new and used property. Bonus depreciation allows businesses to accelerate a greater percentage of short life deductions compared to standard cost segregation and strait line depreciation methods.
100% Bonus Depreciation
Before the new One Big Beautiful Bill (OBBB) was passed by Congress on July 3, 2025, bonus depreciation was predicted to follow a phase-down schedule beginning in 2023. With the President signing the OBBB into law July 4, 2025, bonus depreciation is essentially supercharged because the bill reinstates 100% first-year bonus depreciation for eligible tangible property obtained after January 19, 2025. Businesses can now fully deduct the cost of qualifying assets in the same year they are purchased and placed into service.
For example, if a business purchases short life qualified machinery for $100,000, using bonus depreciation would allow them to deduct the full amount in the first year instead of spreading the deduction over five or seven years.
Before the OBBB, bonus depreciation was primarily governed under the 2017 Tax Cuts and Jobs Act (TCJA), which provided 100% bonus depreciation for eligible property from September 28,2017 to December 31, 2022 before it began phasing out at a rate of 20% per year starting in 2023.
Economic Growth
Economists anticipate that restoring 100% bonus depreciation will boost the U.S. economy by encouraging others to make greater investments in machinery and other equipment and this should ultimately promote economic growth. This change in tax policy for business owners provides greater certainty for long-term tax and investment strategies.
How Will Business Property Owners Benefit?
For property owners who are investing in rental or commercial real estate, the reinstatement of 100% bonus depreciation under the OBBB is a gamechanger. Some of the benefits resulting from the law include immediate tax deductions and enhanced cash flow. Furthermore, bonus depreciation is especially powerful when paired with cost segregation. A cost segregation study breaks down the components of a property into short-life asset classes, such as 5,7 and 15 years. By using 100% bonus depreciation, those components can be fully expensed right away, resulting in greatly accelerating deductions.
Considerations
One thing to consider if you are a business property owner is to time or plan your acquisitions carefully. As mentioned earlier, assets must be placed into service after January 19, 2025, for them to fall under the new bill. It is important to strategically plan your taxes, including cost segregation, to help fully leverage the benefits of the new bill. Act now and maximize your property’s value while the full benefit is in effect.
Return of 100% Bonus Depreciation Webinar
In a free webinar, Sari Quinlan will be discussing the return to 100% Bonus Depreciation at 10am CST on Friday, July 11th . The webinar will cover an in-depth look at bonus depreciation and what to expect with the new changes, as well as how cost segregation studies work and how they can help property owners maximize the benefits.