Context and Clarity
On July 4, 2025, a sweeping reconciliation package was signed into law—often referred to as the One Big Beautiful Bill Act (OBBBA). Among its many tax provisions, it permanently restores 100% bonus depreciation for qualifying assets placed in service on or after January 20, 2025. This reverses the earlier phase-down under the Tax Cuts and Jobs Act, which had reduced bonus depreciation to just 40% at the start of the year.
Why This Matters in 2025
From January 1 through January 19, 2025, bonus depreciation still followed the old schedule. But beginning January 20, any qualifying property placed in service can once again be fully expensed in year one, provided the acquisition contract also meets the timing rules.
Cost Segregation’s Role
This change restores the full value of cost segregation studies. By breaking down a property into its individual components—flooring, lighting, HVAC, and site improvements—owners can reclassify assets into 5-, 7-, or 15-year MACRS categories. All of these shorter-life assets now qualify for immediate expensing when placed in service after January 20, 2025.
Example:
- A property owner completes a cost segregation study and identifies $800,000 of personal property.
- Placed in service before Jan 19, 2025: only 40% ($320,000) could be deducted immediately.
- Placed in service on or after Jan 20, 2025: the entire $800,000 can be deducted in year one.
The result is a substantial improvement in first-year cash flow—capital that can be redeployed into operations, expansion, or debt reduction.
What Does That Look Like in Practice?
Under normal depreciation rules, assets must be deducted slowly over their assigned recovery period:
- 5, 7, or 15 years for land improvements, equipment, or fixtures.
- 27.5 or 39 years for residential or commercial buildings.
So if you buy $100,000 of machinery with a 5-year life, you might normally deduct only about $20,000 per year. With 100% bonus depreciation, reinstated by OBBBA, you can deduct the full $100,000 in the year the asset is placed in service.
Implications for Real Estate and Capital Planning
This reinstated provision makes immediate expensing the norm again, rather than a decades-long recovery. For real estate owners and developers, pairing cost segregation with 100% bonus depreciation means:
- Enhanced liquidity in the year of acquisition or improvement
- Better alignment between investments and financial planning
- A clear, defensible tax position supported by engineering-based analysis
At Acena Consulting, our teams specialize in highly defensible cost segregation studies that maximize the benefits of provisions like bonus depreciation. With the right timing and documentation, this change in law represents a straightforward opportunity to improve cash flow and strengthen long-term planning.
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