100% bonus depreciation is back. Here's what it means for your next residential acquisition.

For a few years there, the math on cost segregation looked different than it used to. Bonus depreciation had been phasing down — 80% in 2023, 60% in 2024, scheduled for 40% in 2025 and eventually zero. Investors who'd done the calculation in 2021 or 2022 found themselves running it again and getting smaller numbers. The case for a study still pencilled, in most situations. But you had to squint at it harder than you used to.

That window closed in 2025.

The One Big Beautiful Bill, signed in mid-2025, restored 100% bonus depreciation for property placed in service on or after January 19, 2025. "Permanently" is generous given how tax policy actually works — every law gets revisited — but the schedule is back to 100%, with no scheduled sunset, and the effect is immediate.

Here's what that means in practice, for the residential investor who's actually buying property.

The mechanics, briefly.

A cost segregation study identifies which components of your property qualify for shorter IRS recovery periods than the 27.5 years that residential real estate is normally depreciated over. Carpeting, cabinetry, specialty electrical, certain plumbing fixtures, decorative finishes, land improvements — these things wear out faster than the building itself, and the IRS knows it. The study moves them from the 27.5-year bucket into 5-year, 7-year, and 15-year buckets.

The reclassified portion is then eligible for bonus depreciation in the year you placed the property in service. With 100% bonus dep back in effect, "eligible" means "fully deductible right now."

The math, for a $525K single-family rental.

Take a typical residential acquisition — $525K all-in, placed in service in 2026, 80% of acquisition price treated as depreciable basis (land excluded). That's $420K of basis on a 27.5-year schedule.

A reasonable residential study reclassifies somewhere around 22% of that basis into shorter-life property. So roughly $92K moves out of 27.5 and into 5/7/15-year buckets.

Without bonus depreciation, you'd deduct that $92K over those shorter periods — still better than 27.5, but spread over years. With 100% bonus dep, the full $92K is deductible in year one.

At a 32% marginal federal rate, that's roughly $29,400 in year-one tax savings. Add state, depending on where you live, and the number gets bigger. That's against a fixed-fee study cost of $1,750. The ROI math is not subtle.

The STR case, which is bigger.

Short-term rentals reclassify higher — typically around 32% of basis, sometimes more — because STRs carry more short-life property: furniture, fixtures, decorative finishes, hot tubs and saunas and EV chargers if you're doing the high-end thing, full kitchen and bath replacements at higher frequency. Same arithmetic, applied to a typical $615K STR cabin, looks more like $50K in year-one savings.

There's an additional wrinkle for STR owners worth flagging: the "STR loophole" allows material participants in a short-term rental to take cost-seg losses against W-2 income, not just against passive real estate income. That changes the picture for high-W-2 earners considerably. We'll write about that mechanic separately — it has its own documentation requirements — but it's worth knowing it exists.

The look-back case.

If you bought a residential property after January 19, 2025 and didn't do a cost segregation study at the time, you haven't lost the deduction. A look-back study captures the cumulative depreciation you should have taken, through a §481(a) change-of-accounting adjustment, in your current tax year. No amended return required.

We've been doing look-backs on property placed in service up to about 15 years ago. The arithmetic is sometimes more compelling than it is for new acquisitions, because you're recapturing several years of missed deduction in a single bite.

What to do now.

If you placed property in service in 2025 or 2026 and haven't done a study — and your CPA hasn't actively talked you out of it for a reason that makes sense to you — it's worth a fifteen-minute feasibility call. We'll give you a candid yes or no based on the property, the basis, and your tax situation. There are properties where a study doesn't pencil. We'll tell you when that's the case.

If you've got a CPA, we work with them. We never poach. The deliverable is built so they can implement it without translating anything.

The window for the bigger numbers is open again. Whether that matters for your specific situation depends on the property and the math — but it's worth running.