Big Beautiful Bill Act Benefits for Real Estate Investors

How did the Big Beautiful Tax Bill signed in 2025 by President Trump affect Cost Segregation and Accelerated Depreciation of Real Estate?

According to the IRS In 2025 “One, Big, Beautiful Bill” (often called the Big Beautiful Tax Bill Act or OBBBA) restored and made permanent 100% bonus depreciation for most qualifying property placed in service after Jan. 19/20, 2025 — and that change materially increases the value of cost-segregation studies because many items reclassified into 5/7/15-year classes can now be expensed immediately instead of being depreciated over decades."

What changed (the essentials)

• The law permanently reinstated 100% bonus depreciation for qualified property acquired and placed in service after ~Jan 19–20, 2025 (reversing the TCJA phase down). That means eligible short-life assets can be fully deducted in year-one.

• “Qualified property” generally includes tangible personal property with MACRS recovery periods of 20 years or less and certain qualified improvement property (QIP) that cost-seg studies typically reclassify out of building structure into 5/7/15-year classes.

How that affects cost segregation in practice

• Bigger immediate tax savings. A cost-seg study that reallocates building costs into 5/7/15-year property now commonly allows those components to be claimed under 100% bonus depreciation, producing much larger year-one deductions and improved cash flow.

• Works best for acquisitions, renovations, and new builds placed in service after the effective date — timing of acquisition/placed-in-service matters.

Important caveats & planning points

• State tax conformity varies. Many states don’t automatically conform to federal bonus depreciation (some decouple or limit it), so federal benefit may be reduced or deferred at the state level — always check state rules.

• Depreciation recapture risk. Accelerating depreciation increases your depreciated basis reduction and therefore can increase depreciation recapture tax when you sell; that trade-off should be considered in planning.

• You can elect out. Taxpayers may (and sometimes should) elect out of bonus depreciation for an entire class of property for a taxable year (or use a transitional election in certain situations); the election rules are set out by the IRS and are made on Form 4562.

For a Cost Segregation Consultation, please schedule an appointment at www.MyCostSegs.com