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There's a decent chance that 100% bonus depreciation is coming back—and for real estate investors, that could be a game-changer. If you’ve been following tax policy, you know that bonus depreciation has been phasing out since 2023. But now that Trump is back in office, there’s a strong possibility it will be reinstated.

And the timing? Well, it’s all about politics.

What Is Bonus Depreciation and Why Does It Matter for Real Estate Investors?

Depreciation is a tax benefit that allows real estate investors to recover the cost of a property over time by writing off a portion of its value each year. Normally, residential rental properties are depreciated over 27.5 years, and commercial properties over 39 years—meaning you only get a small deduction each year. However, bonus depreciation allows you to take a much larger deduction upfront. Instead of spreading deductions out over decades, you can immediately write off a significant portion of the property’s shorter-lived components, like:
  • Signage
  • Appliances
  • Light fixtures
  • Security systems
  • Carpets and flooring
  • Parking lots and landscaping
These components are identified through a cost segregation study, which breaks a property into different asset categories. If bonus depreciation is available, you can deduct 100% of these assets’ costs in the first year instead of waiting years to recover their value. This can result in huge tax savings—sometimes allowing investors to eliminate most or all of their taxable rental income in the year they buy a property. For more details on cost segregation, check out my blog that provides a step-by-step guide.

A Quick Recap: How Bonus Depreciation Has Been Phasing Out

The Tax Cuts and Jobs Act (TCJA) of 2017 introduced 100% bonus depreciation, allowing investors to immediately write off the cost of certain property improvements and assets. But that provision started phasing out in 2023:
  • 2023: 80% deduction
  • 2024: 60% deduction
  • 2025: 40% deduction
  • 2026: 20% deduction
  • 2027 and beyond: No longer any bonus depreciation
For real estate investors, this phase-out means losing the ability to accelerate deductions on short-lived assets, reducing the tax benefits of buying and improving properties.

Biden’s Attempt to Restore The Tax Cuts and Jobs Act (And Why It Failed)

What a lot of people don’t realize is that Democrats actually tried to reinstate 100% bonus depreciation under the Biden administration. A tax bill was proposed in early 2024 that would have brought it back temporarily, but it stalled in the Senate. Why? Republicans held the majority and didn’t want to pass it right before the election. Giving Biden a win on tax cuts—especially one that benefits businesses and investors—could have helped him politically, so it never made it through Congress. Even though both parties generally support bonus depreciation, the timing made it stall out.

Why Bonus Depreciation Reinstatement Is Likely to Pass Under Trump

Now that Trump is back, the political dynamics have flipped. Republicans who blocked it last year are now in a position to push a similar tax policy through, but now it benefits a different administration. For real estate investors, that means a potential return of 100% bonus depreciation on cost segregation components, which could significantly lower taxable income in the year a property is acquired.

What Real Estate Investors Should Do Now To Prepare

Don’t Delay Cost Segregation

If you already own property or are planning to purchase for tax benefits, a cost segregation study remains a crucial step. Waiting for legislative updates could mean missing out on significant savings.

Even if bonus depreciation is reinstated retroactively, having a completed cost seg study ensures your tax CPA is ready to maximize your deductions immediately. Delaying the process only creates uncertainty and could put you behind when it’s time to file. Stay proactive—get the study done now and position yourself to benefit no matter what changes come.

Watch for Retroactive Changes

If bonus depreciation is reinstated retroactively to the start of 2025, properties you’ve already purchased this year could still qualify for full expensing. This could create a significant tax-saving opportunity. However, this should not delay your cost segregation study. Completing your study now ensures your tax CPA has the necessary data to apply any reinstated benefits immediately.

Final Thoughts

At the end of the day, this isn’t really about tax policy—it’s about politics. Bonus depreciation has been widely supported by both parties, but when and how it passes depends on who’s in office.

Now that the election is over, the roadblocks are gone, and we’ll likely see action on it soon. If you’re in real estate, this could be one of the biggest tax advantages to watch for in 2025.

Is Cost Segregation Right for You?

Not every property or investor will benefit equally from cost segregation. Large-scale properties with significant components (think commercial real estate or multifamily housing) often see the biggest benefits. Partnering with an experienced CPA or tax advisor is crucial to ensure this strategy aligns with your overall financial goals.

Cost segregation isn't just a tax-saving strategy—it’s a tool to build wealth. If you’re ready to maximize your real estate investment returns, understanding and leveraging this strategy could make all the difference.

We built a free calculator that you can use to estimate your savings. Start planning your tax strategy today—schedule a consultation with Maven Cost Segregation. Book a call with me to discuss!
Book a call with me to discuss!

Thank you for reading. Please reach out and let me know what resonated with you. I read every email!

Cheers,

Sean

CPA | Founder of Maven Cost Seg, Maven Success, and Maven Equities​ P.S. Forwarded this email? Click here to make sure you get added to the weekly distribution list! ​​​