In May 2025, the U.S. House of Representatives narrowly passed the Tax Relief for American Families and Workers Act of 2024, also known as the "One Big Beautiful Bill Act" (OBBBA). One of the most significant wins for real estate investors in this sweeping legislation is the return of 100% bonus depreciation.

This bill now heads to the Senate, where it could face revisions or delays, but if passed, it would create one of the most favorable tax environments for real estate investment in years.

What Is 100% Bonus Depreciation?

Bonus depreciation allows investors to immediately deduct the full cost of qualifying property in the year it’s placed in service. Under this bill, 100% bonus depreciation would apply to qualified property placed in service between January 1, 2025, and December 31, 2029.

This allows investors to front-load their tax benefits, rather than slowly depreciating property over many years—dramatically improving cash flow and ROI.

What's Eligible for Bonus Depreciation?

While land and primary residences don’t qualify, the following types of property components do—if part of an investment or rental property:

• Appliances

• Carpeting and flooring

• Cabinetry

• Interior non-structural improvements

• Landscaping and fencing

• Driveways and parking lots

To take full advantage, many investors will commission a cost segregation study that breaks down a property into depreciable components.

Real Estate Example: Year-One Tax Savings

Let’s say you purchase a rental property in 2025:

• Purchase Price: $4,500,000

• Land Value: $1,125,000

• Building Value: $3,375,000

A cost segregation study identifies:

• $600,000 of 5- and 7-year property (e.g., appliances, flooring, cabinetry, window coverings)

• $300,000 of land improvements (e.g., driveway, fencing, landscaping)

Total eligible for 100% bonus depreciation: $900,000

At a 37% tax rate, that could mean:

• Immediate deduction with bonus depreciation: $900,000

• Tax savings in Year 1: $333,000

Without bonus depreciation:

• These improvements would typically be depreciated over 5, 7, or 15 years.

• Assuming an average first-year deduction of 10% of those items (a rough average for non-bonus schedules), the deduction would only be around $90,000.

• Tax savings without bonus depreciation: $33,300

Net Year-One Benefit of Bonus Depreciation:

• Additional deduction: $810,000

• Additional tax savings: $299,700

Why This Matters Now

With the bill now through the House and under Senate consideration, there’s a real possibility that this tax-saving opportunity will soon become law. If it passes:

• Real estate investors can write off major components in the first year

• Capital will free up for faster portfolio growth

• Year-one cash flow improves dramatically

• More income from other properties can be offset

What to Do Next

If you're considering buying rental property this year:

1. Monitor the bill’s progress in the Senate.

2. Plan for a cost segregation study to maximize depreciation. A cost segregation study typically costs from $5,000 to $15,000 depending on the size and complexity of the property and whether it's a detailed engineering-based study (the gold standard). However; for high value properties, like one priced at $4.5 Million, the return on investment is massive and well worth the cost. 

3. Talk to your CPA to forecast the savings and adjust your 2025 tax plan.

Final Thoughts

The return of 100% bonus depreciation could be a game-changer for real estate investors. With the bill already through the House, now’s the time to prepare your strategy so you're ready to act when it becomes law.

Have questions about how this might apply to your real estate goals? Let’s connect and build a plan tailored to your investment strategy.