Bonus depreciation has been one of the most powerful tax tools for real estate investors—enabling large, immediate deductions for qualifying property components. But in 2025, we’re deep into the phase-down period set by the Tax Cuts and Jobs Act (TCJA), and the benefits are starting to shrink. Or are they?
With proposed legislation from the Trump administration aimed at restoring 100% bonus depreciation with the possibility of it being retroactive, investors are once again navigating uncertainty—with opportunity on the line.
Let’s look at what’s happening now, what might change, and how real estate investors can be prepared.
Where Things Stand: Bonus Depreciation Is at 40% in 2025
As of today, bonus depreciation for properties placed in service in 2025 is limited to 40% of qualifying assets. That means investors can still take advantage of accelerated depreciation on things like personal property and land improvements, but not at the same scale as in previous years.
This is part of the scheduled phase-out:
- 2023: 80%
- 2024: 60%
- 2025: 40%
- 2026: 20%
- 2027 and beyond: 0%
Even at 40%, this remains a meaningful deduction when applied to assets identified through a cost segregation study.
The Trump Administration Proposal: A Return to 100% Bonus Depreciation
In 2025, the Trump administration introduced a proposal to reinstate 100% bonus depreciation, with the possibility of it being retroactive to an earlier 2025 date. The stated goal: to boost domestic investment and stimulate business growth. This would mark a significant shift in tax planning strategy for commercial and residential real estate owners.
The proposal is still pending legislation and will need congressional approval—but if passed, it could apply to properties placed in service earlier in the year, offering investors a second chance at the full write-off.
What a Difference It Makes: 40% vs. 100% Bonus Depreciation
To understand the impact, let’s look at a real-world scenario:
Example:
A real estate investor acquires a $2 million commercial property in mid-2025. A cost segregation study identifies $600,000 of assets eligible for bonus depreciation.
- Under current law (40% bonus):
$600,000 × 40% = $240,000 immediate deduction in year one
- If 100% bonus is reinstated:
$600,000 × 100% = $600,000 immediate deduction in year one
That’s a difference of $360,000 in deductions available in the first year alone—significantly improving after-tax cash flow and reinvestment potential.
Even if bonus depreciation remains at 40%, that’s still $240,000 accelerated into the current tax year rather than spread over time. There is still real value to be captured.
What Should Investors Do Right Now
Regardless of what happens in Washington, real estate investors should act now to avoid being left behind. Here’s what to focus on:
1. Act Now—Avoid the Rush
With the possibility of 100% bonus depreciation being restored retroactively, we expect a surge in demand for cost segregation studies. By getting your study done now, you:
- Lock in your 2025 deductions under current law
- Are fully prepared to amend or adjust if the law changes
- Avoid long wait times later in the year
CSA will update your study at no additional cost if the law is revised and bonus depreciation is increased. We’ll handle the correction and documentation for your CPA.
2. Review Properties Placed in Service in 2020–2024
Even if you didn’t perform a cost segregation study when you acquired the property, it’s not too late:
- A Form 3115 (change in accounting method) allows retroactive application of bonus depreciation under the rates that were in effect at the time the property was placed in service.
- This is especially powerful for 2020–2022 properties, when 100% bonus was still available.
3. Plan for Both Outcomes
If you’re acquiring or improving a property in 2025, model both outcomes:
- At 40%, you still get meaningful immediate deductions
- At 100%, your year-one cash flow boost could be hundreds of thousands more
Your tax strategy should be adaptable enough to pivot either way without delay.
Why Cost Segregation Still Matters—No Matter What
Whether bonus depreciation remains at 40% or is restored to 100%, cost segregation remains a foundational strategy for maximizing tax savings.
Here’s why:
- It identifies building components that qualify for 5-, 7-, and 15-year treatment—essential for both bonus and MACRS depreciation
- Even without bonus, shorter-life assets accelerate depreciation compared to the standard 27.5- or 39-year schedules
- It allows for greater flexibility in strategic planning—especially around acquisitions, dispositions, and recapture
Cost segregation is what unlocks the opportunity. Bonus depreciation just amplifies it.
Final Thoughts: Be Ready, Not Reactive
The debate in Washington will take time to resolve. Your tax planning shouldn’t wait for that.
- If bonus depreciation stays at 40%, there are still tens or hundreds of thousands in deductions to capture
- If it returns to 100%, you want to be first in line—not scrambling to find support during a post-legislation rush
Either way, the time to act is now. A cost segregation study gives you the flexibility to maximize whichever version of the tax code prevails.
✅ Ready to See What You Could Save?
We’ll complete your study based on the current law—and if bonus depreciation is restored to 100%, we’ll update your report at no additional cost.
You’ll lock in your opportunity now and avoid the rush later.
➡️ Request your free benefit estimate today and make 2025 your most tax-efficient year yet.
