100% Bonus Depreciation Is Permanent: What Commercial Real Estate Investors Need to Know About OBBBA

What changed in July 2025

The One Big Beautiful Bill Act (OBBBA) was signed into law in July 2025. Among its tax provisions, the most consequential for commercial real estate investors is the permanent restoration of 100% bonus depreciation under Internal Revenue Code Section 168(k).

Before OBBBA, bonus depreciation was on a phase-down schedule established by the Tax Cuts and Jobs Act of 2017:

OBBBA reset the schedule. From January 2025 forward, qualifying property placed in service receives 100% bonus depreciation. The phase-down is repealed. There is no current legislative sunset.

What “qualifying property” means for commercial real estate

Section 168(k) bonus depreciation applies to property with a Modified Accelerated Cost Recovery System (MACRS) recovery period of 20 years or less. In a commercial real estate context, that includes the three accelerated buckets identified in an engineered cost segregation study:

• 5-year personal property under Section 1245 — carpet, decorative partitions, tenant-specific HVAC, decorative lighting, specialty plumbing, tenant fit-out components, kitchen equipment, medical equipment, specialty MEP.
• 7-year specialty under Section 1245 — built-in casework, specialty fixtures.
• 15-year land improvements under Section 1250 — parking lots, sidewalks, site lighting, monument signage, landscaping, fencing.

The 39-year structural bucket (the building shell, base building HVAC, structural plumbing and electrical, permanent partitions) does not qualify for bonus depreciation. Neither does the 27.5-year residential rental bucket. The cost segregation study is what separates the eligible buckets from the ineligible one.

What the math looks like in practice

Take a $5.5M Class B suburban office acquisition with 32,000 SF — one of the engineered analyses in our catalog. The Cost Seg Smart engine identifies:

• 5-year: $720K
• 7-year: $56K
• 15-year: $483K
• 39-year: $3.44M

Total accelerated: $1.26M. Under 100% bonus depreciation, the full $1.26M deducts in year 1. At a 37% federal bracket, that’s $466K in year-1 federal tax savings — against a study fee of roughly $5,000.

The same property under 60% bonus depreciation (the 2024 schedule) would have generated $466K × 0.60 = $280K in year-1 savings. The remaining 40% of the accelerated bucket would have stretched over the MACRS recovery period. The cash impact in year 1 is 66% larger under OBBBA.

Catch-up depreciation under Section 481(a)

For commercial properties acquired in prior years but never cost-segregated, Section 481(a) allows the taxpayer to take all previously-missed accelerated depreciation in the year the cost segregation study is completed. No amended returns are required. Form 3115 is filed with the IRS.

A property acquired in 2022 and cost-segregated in 2025 gets:

1. The catch-up adjustment — all accelerated depreciation that should have been taken in 2022, 2023, and 2024.
2. The 2025 year’s normal MACRS deduction on the now-classified components.
3. Plus 100% bonus depreciation on the accelerated buckets if they were placed in service in 2025 or later — though the catch-up adjustment itself doesn’t get the bonus (bonus applies to year of placement in service, not the year of catch-up).

For properties placed in service in 2023 or 2024, the bonus depreciation that would have been available under the original phase-down schedule (80% in 2023, 60% in 2024) is preserved through the catch-up — those rates apply to the accelerated buckets at their original placement-in-service year. OBBBA didn’t retroactively change the 2023 or 2024 rules; it restored 100% going forward.

Why now matters for commercial owners

For owners of commercial properties acquired in 2025 or planning to acquire in 2026, the math is unambiguous:

• Acquire and cost-segregate in the same tax year captures the full benefit. The engineering work needs to be completed and the depreciation properly classified before the tax return is filed.
• Properties already in service but never cost-segregated still capture catch-up depreciation under Section 481(a). The 2025 catch-up benefit is the largest one-year deduction many commercial owners will see in their hold period.
• Properties under construction or being renovated can have a pre-construction cost segregation review performed so the construction accounting maps to the depreciation schedule directly. This is the cleanest approach for new builds.

What CPAs are asking

Three questions come up consistently from CPA partners since OBBBA passed:

Is there a sunset date? No. The 100% rate is permanent in current legislation. A future Congress could change it, but there’s no scheduled phase-down.

Does OBBBA affect the depreciation recapture treatment on sale? No. The recapture rules under Section 1245 (personal property — ordinary income recapture) and Section 1250 (real property — 25% maximum rate on unrecaptured Section 1250 gain) are unchanged. Cost segregation’s net benefit still depends on the spread between the deferred income tax in the deduction year and the recapture liability at sale.

Does OBBBA change the Qualified Improvement Property (QIP) rules? No. QIP rules under Section 168(e)(6) for interior improvements to non-residential buildings continue to apply separately. QIP gets 15-year depreciation under the CARES Act technical correction; it’s not affected by OBBBA except insofar as the 15-year property qualifies for 100% bonus.

Bottom line

The window between 2023 and OBBBA’s enactment featured the lowest bonus depreciation rates of the last two decades. Many commercial owners deferred cost segregation work waiting to see whether Congress would extend bonus depreciation. The answer is now in: 100% is restored, and it’s permanent under current law.

For any commercial property placed in service in 2025 or later, the cost segregation calculation has materially improved. For properties placed in service in prior years, the catch-up benefit captured in 2025 is the largest depreciation event most owners will see in their hold period.

Schedule a scoping call → to walk through the impact on a specific property, or see the case studies for property-class-specific examples.