OBBBA Restored Permanent 100% Bonus Depreciation: What It Means
OBBBA permanently restored 100% bonus depreciation for property acquired after Jan 19, 2025. Here's the eligible property, the transition rules, and what it means for cost seg + equipment buys.
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TLDR
OBBBA permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025. The phase-down schedule that was running (40% in 2025, 20% in 2026, 0% by 2027) is dead for new property. Property with a recovery period of 20 years or less — equipment, vehicles, furniture, land improvements, the personal-property buckets in cost segregation — gets fully deducted in the year it’s placed in service. For real estate investors running cost seg + STR loophole, this restored the headline tax move of the decade.
In this guide, you’ll learn:
- See the phase-down schedule that OBBBA killed (and the Jan 19, 2025 transition cutoff)
- Recognize what qualifies — equipment, vehicles, furniture, land improvements, the 5/7/15-year cost seg buckets
- Calculate the year-one delta for a $500K rental: $84K of additional tax savings vs. the pre-OBBBA 40% rate
- Understand how 100% bonus interacts with Section 179 ($1.16M expensing) for typical small-business equipment buys
- Get the Section 481(a) look-back path for catching up missed cost seg on properties owned 2+ years
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100%
Bonus depreciation
Permanent — phase-down repealed
-
Jan 19, 2025
Acquisition cutoff
Property acquired after this date
-
≤ 20 yrs
Recovery period to qualify
Equipment, vehicles, cost-seg buckets
Source: IRC §168(k) as amended by the One Big Beautiful Bill Act (signed July 4, 2025).
#What changed and when
Before OBBBA, bonus depreciation was phasing down:
| Year property placed in service | Bonus depreciation rate |
|---|---|
| 2017–2022 | 100% |
| 2023 | 80% |
| 2024 | 60% |
| 2025 (pre-OBBBA) | 40% |
| 2026 | 20% |
| 2027+ | 0% |
OBBBA (signed July 4, 2025) eliminated the phase-down for property acquired after January 19, 2025 — meaning the rate goes back to 100% and stays there permanently.
Important transition rule: property placed in service between January 1, 2025 and January 19, 2025 remains subject to the pre-OBBBA phase-down (generally 40%, 60% for certain long-production-period property). The cutoff date matters for early-2025 acquisitions.
#What qualifies for 100% bonus depreciation
Under IRC Section 168(k), qualifying property must:
- Have a recovery period of 20 years or less under MACRS
- Be acquired and placed in service after the effective date
- Be the original use by the taxpayer OR meet specific used-property rules
- Not be excluded property (certain regulated utilities, foreign-use property, etc.)
The property categories that qualify:
- 5-year property: vehicles, computers, office equipment, certain machinery
- 7-year property: office furniture, fixtures, agricultural machinery
- 15-year property: land improvements, qualified improvement property, certain leasehold improvements
- 5/7/15-year cost segregation buckets: the personal-property and land-improvement components of real estate identified through cost seg studies
Critically: this includes the cost-seg-eligible portions of rental properties and commercial real estate. A $500K residential rental that gets cost seg’d typically has ~$140K-$160K of basis allocated to 5/7/15-year property. Under 100% bonus, that entire allocated basis deducts in year one.
#Why this matters for real estate investors
The combination of cost segregation + 100% bonus depreciation is the highest-leverage legal tax move in the U.S. tax code for high-income households who own rental real estate.
| Pre-OBBBA (40% bonus) | Post-OBBBA (100% bonus) | |
|---|---|---|
| Year-1 bonus on cost-seg basis | $140K × 40% = $56K | $140K × 100% = $140K |
| Plus structure depreciation (27.5-yr) | ~$13K | ~$13K |
| Total year-1 deduction | ~$69K | ~$153K |
| Incremental year-1 tax savings (32% bracket) | — | ~$84K |
Pre-OBBBA (under the 40% phase-down):
- $500K residential rental, cost-seg-eligible basis $140K
- Year-1 bonus depreciation: $140K × 40% = $56K (with the remaining $84K depreciated over the original 5/7/15-year schedules)
- Plus standard 27.5-year structure depreciation: ~$13K
Post-OBBBA (100% bonus):
- Same property: $140K × 100% = $140K immediate year-1 deduction
- Plus $13K structure depreciation
- Total year-1 deduction: ~$153K vs. ~$69K before
For a taxpayer in the 32% bracket using STR loophole or REPS to apply the loss against W-2 income, this is ~$84K of incremental year-one tax savings vs. what was scheduled before OBBBA.
See the full cost seg fundamentals guide for the mechanics.
#Why this matters for equipment-heavy businesses
Beyond real estate, 100% bonus depreciation matters for:
Construction companies — trucks (over 6,000 lbs GVWR can get full Section 179 + bonus on top), heavy equipment, tools, machinery. A $180K dump truck purchased and placed in service after Jan 19, 2025 deducts in full in year one.
Trucking owner-operators — Class 8 tractors, trailers, refrigeration units, telematics equipment.
Medical + dental practices — chairs, x-ray equipment, diagnostic devices, technology. A $200K dental chair-and-x-ray purchase fully deducts year one.
Manufacturers — machinery, production equipment, robotics, conveyance systems.
Landscapers — bucket trucks, chippers, mowers, irrigation equipment.
For high-income business owners in equipment-heavy industries, year of purchase becomes a tax-planning lever. Timing a $300K equipment buy into a high-income year delivers a six-figure tax shelter at the top brackets.
#How it interacts with Section 179
Section 179 lets you elect to expense up to ~$1.16M of qualifying property (2024 limits, indexed annually) in the year of purchase. Bonus depreciation is a separate provision that takes over after Section 179 is maxed.
The interaction:
- Apply Section 179 first (up to the limit, with the phase-out above ~$2.89M of total purchases)
- Bonus depreciation applies to remaining basis at 100%
- Result: same as full expensing for most small + mid-business purchases
For very large equipment buys (over Section 179 phase-out), bonus depreciation becomes the primary mechanism. For most ETS clients (purchases under $1M), Section 179 alone captures the deduction.
#Look-back planning: amend prior returns?
For property already placed in service:
- Property placed in service 2023-2024 (during phase-down): cannot retroactively benefit from OBBBA’s 100% rule. The phase-down rates applied to those years.
- Property placed in service Jan 1-19, 2025: transition rule — still subject to phase-down (40%).
- Property placed in service after Jan 19, 2025: 100% applies.
You generally cannot amend a prior return to claim more bonus depreciation than was available under the law at the time of placing in service. However, Section 481(a) look-back studies for cost segregation remain valid — if you never ran cost seg on a property you’ve owned for years, you can do a look-back study and catch up the missed accelerated depreciation in the current year (without amending), and the catch-up uses current law rates.
For a property you’ve owned since 2018 that’s never been cost seg’d, the look-back in 2026 would apply 100% bonus to the previously-unaccelerated 5/7/15-year buckets. That’s a one-time event with potentially six-figure tax savings.
#What we do when you engage
For OBBBA-driven cost seg + equipment depreciation engagements:
- Discovery call — confirm the property/equipment qualifies, model year-one tax savings
- Cost segregation study (for real estate) — in-house for sub-$1M properties; engineering-firm partner for $1M+
- Section 481(a) look-back analysis (for properties owned 2+ years without cost seg) — model the catch-up deduction
- Year-one tax projection — including STR/REPS unlock if applicable
- Year-end planning — time additional equipment purchases into high-income years to maximize the deduction value
Engagement scope: $5,000-$15,000 for a single-property cost seg engagement; $10,000+ for complex multi-property + look-back work; rolled into broader tax-planning advisory retainer for ongoing clients.
#Common questions
Does the 100% rule apply to used property? Yes, with conditions. Used property qualifies for bonus depreciation if (a) you didn’t previously use it (no prior depreciation taken by you), (b) it wasn’t acquired from a related party, and (c) the basis isn’t determined by reference to the seller’s basis. Most arm’s-length purchases of used equipment qualify.
What if I bought property in 2024 — can I still claim 100%? No. 2024 purchases got 60% bonus. The OBBBA rule applies to property acquired after Jan 19, 2025. Earlier purchases are locked into their then-current rate.
Can I do cost seg on a property I bought in 2025 before Jan 19? You can do the cost seg study, but the year-1 deduction follows the pre-OBBBA 40% phase-down rate for that property. Still better than no cost seg — but smaller than post-Jan-19 purchases.
Does this benefit me if I have no other income to offset? The deduction itself works regardless. But to USE the loss in the current year, you need offsetting income — passive income (other rentals), STR loophole income (to offset W-2), REPS (to characterize all rentals as non-passive), or active business income. Without one of those, the loss carries forward as suspended passive loss.
What about depreciation recapture when I sell? Recapture applies regardless of bonus rate. Section 1245 recapture (personal property + 15-year land improvements) at ordinary rates; Section 1250 recapture (structure portion) at 25% federal cap. 1031 exchange defers all of this.
Is the IRS guidance on OBBBA bonus depreciation complete? Treasury and the IRS issued interim guidance in late 2025 (Notice and Rev. Proc. updates available at irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill). Some operational details continue to evolve.
If you own real estate or your business buys significant equipment, OBBBA’s 100% bonus depreciation likely changes your year-one tax position by five figures or more. The Discovery call is the right next step. We model the year-one impact + cost seg engagement against your specific facts.