Bonus depreciation, explained
Bonus depreciation in 2026
Bonus depreciation is a first-year deduction under IRC §168(k) that lets you write off the full cost of qualifying property (generally 5-, 7-, and 15-year property) in the year it is placed in service, instead of spreading it over its life. The 2025 tax law, the One Big Beautiful Bill Act, permanently restored the rate to 100% for property placed in service after January 19, 2025. A building itself does not qualify, but a cost segregation study identifies the shorter-life components inside it that do.
The rate by placed-in-service year
The bonus rate is fixed by the date a property is placed in service, not by when you file. OBBBA restored 100% for anything placed in service after January 19, 2025.
| Placed in service | Bonus rate | Note |
|---|---|---|
| 2022 | 100% | Final year of the original 100% window. |
| 2023 | 80% | Phase-down begins. |
| 2024 | 60% | Phase-down continues. |
| 2025 (before Jan 20) | 40% | Old-law rate for early-2025 placements. |
| 2025 (on/after Jan 20) | 100% | OBBBA restores 100%, placed in service after Jan 19, 2025. |
| 2026 and later | 100% | Made permanent by OBBBA. |
How it works with cost segregation
Bonus depreciation and cost segregation are a pair. One sets the rate; the other finds the property it can apply to.
- 01
The building itself does not qualify
Residential rental structures depreciate over 27.5 years and commercial over 39, and that shell is not eligible for bonus depreciation. Left as one asset, none of your purchase gets the first-year write-off.
- 02
A cost segregation study finds the parts that do
An engineered study reclassifies components into 5-, 7-, and 15-year property: flooring, cabinetry, appliances, decorative lighting, landscaping, fencing, driveways. On many properties that is 20% to 35% of the basis.
- 03
Those components take bonus depreciation
At 100%, every qualifying component is written off in the year it is placed in service. The rate is fixed by the placed-in-service date, not by when you file, so the date the property went into service is what matters.
- 04
Older properties can still catch up
If you placed a property in service in a prior year and never accelerated it, a lookback study claims the missed depreciation on your current return through Form 3115 and a §481(a) adjustment, with no amended prior-year returns.
Unlevered prepares and signs the engineering study. Your CPA reviews it, applies independent judgment, and remains the sole preparer of your return. These figures are not tax advice; your advisor confirms before you rely on any of them.
Common questions
- What is bonus depreciation?
- Bonus depreciation is a first-year deduction under IRC §168(k) that lets you write off the full cost of qualifying property (generally 5-, 7-, and 15-year property) in the year it is placed in service, instead of spreading it over its life. The 2025 tax law, the One Big Beautiful Bill Act, permanently restored the rate to 100% for property placed in service after January 19, 2025. A building itself does not qualify, but a cost segregation study identifies the shorter-life components inside it that do.
- Is bonus depreciation 100% in 2026?
- Yes. The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025, which includes 2026 and beyond. This reversed the earlier phase-down that had dropped the rate to 40% for early 2025 and would have eliminated it by 2027.
- What is the bonus depreciation rate by year?
- The rate is set by the year the property is placed in service, not the year you file: 100% for 2022, 80% for 2023, 60% for 2024, 40% for property placed in service before January 20, 2025, and 100% again for property placed in service on or after that date, made permanent for 2026 and later by OBBBA.
- How does bonus depreciation work with cost segregation?
- They work together. Bonus depreciation only applies to shorter-life property (generally 5-, 7-, and 15-year), and a building is not shorter-life property. A cost segregation study is what identifies the components inside the building that qualify: flooring, cabinetry, appliances, site improvements, and more. Without a study, most of a property never reaches the shorter classes that bonus depreciation can accelerate.
- Can I still get bonus depreciation on a property I placed in service years ago?
- The bonus rate is locked to the original placed-in-service date, so a property placed in service during the phase-down keeps that lower rate. But you can still capture the depreciation you never accelerated: a lookback cost segregation study reclassifies the components and claims the cumulative missed depreciation on your current return through Form 3115 and a §481(a) adjustment, without amending prior returns.
- Does the building itself qualify for bonus depreciation?
- No. The building shell is real property with a 27.5- or 39-year life and is not eligible. Only the personal-property and land-improvement components a cost segregation study reclassifies into 5-, 7-, and 15-year property qualify for the first-year write-off.
Put 100% bonus to work on your property.
A study finds the components that qualify and books them in year one. Start with one address, or read a real study to see the reclassification first.