100% bonus depreciation is law through 2026: the One Big Beautiful Bill Act (OBBBA) permanently restored full deduction for qualifying property acquired after January 19, 2025You can deduct the entire cost in Year 1: eligible assets placed in service in 2026 qualify for the full deduction, not spread over 5–39 yearsCommercial real estate uses that qualify: office buildings, retail, industrial, apartment complexes, and certain improvements all eligibleIt stacks with cost segregation: combine bonus depreciation with cost segregation studies to accelerate write-offs on real property improvementsTiming matters: property must be "placed in service" (ready for business use) in 2026 to qualifyState rules vary: whether you can claim this on your state return depends on your state and how you hold the property (personal return vs. LLC/partnership). These rules change often, verify with your CPA before counting on the deductionThe One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. Before this change, bonus depreciation was phasing down:
The new law eliminates the phase-down entirely, meaning 100% bonus depreciation is now permanent law, not a temporary incentive. For commercial real estate investors, this is a rare opportunity to write off the full cost of qualifying assets in the year they're purchased and placed in service.
A $2 million commercial office building with $400,000 in qualifying personal property (HVAC, fixtures, equipment) can now be deducted in full in Year 1, rather than spread over 27.5 to 39 years. On a 25% combined federal and state tax rate, that's approximately $100,000 in Year 1 tax savings, cash that stays in your business instead of going to the IRS.
Permanent law doesn't remove the timing requirement: the deduction only applies to property placed in service in the current tax year. If you're planning capital expenditures, 2026 is still the year to place qualifying assets in service to capture the deduction on this year's return.
Bonus depreciation is a tax deduction that allows you to write off a large portion (or all) of the cost of certain assets in the year they are purchased and placed in service, rather than depreciating them over their useful life.
MACRS Depreciation (regular depreciation): Assets are deducted over their useful life:
Bonus Depreciation (2026): 100% of the cost can be deducted in Year 1, as long as the property qualifies and is placed in service in 2026. This is permanent law as of the One Big Beautiful Bill Act (signed July 4, 2025, retroactive to property acquired and placed in service after January 19, 2025).
Not all commercial real estate qualifies. The rules are specific.
Qualified real property placed in service after January 19, 2025:
| Item | Amount | Bonus Deduction | Benefit (at 25% tax rate) |
|---|---|---|---|
| HVAC System | $150,000 | $150,000 | $37,500 |
| Electrical/Plumbing | $120,000 | $120,000 | $30,000 |
| Interior Improvements (QIP) | $300,000 | $300,000 | $75,000 |
| Furniture/Equipment | $80,000 | $80,000 | $20,000 |
| Total Bonus Depreciation | $650,000 | $650,000 | $162,500 |
Conservative Year 1 extra tax savings: $130,000
Bonus depreciation collapses that entire multi-year schedule into a single Year 1 deduction. The difference is clear: bonus depreciation saves you $130,000 in Year 1 by accelerating deductions (this assumes your income allows this).
Contact Yield Shield for a free cost segregation consultation. We'll evaluate your properties, estimate your Year 1 tax benefit, and coordinate with your CPA to maximize your deductions.
Q: If I buy a property in 2026, can I claim bonus depreciation?
A: Yes, if the property qualifies and is placed in service in 2026. Property must be acquired after January 19, 2025, and actually placed in service (ready for business use) by December 31 of the year claimed.
Q: Does bonus depreciation apply to used/existing buildings?
A: Bonus depreciation generally applies only to newly acquired property. However, if you buy an existing building and make capital improvements (renovation, new HVAC, new roof), those improvements qualify for bonus depreciation.
Q: Can I claim bonus depreciation on a property I bought before 2025?
A: The building shell itself (39-year or 27.5-year real property) never qualifies for bonus depreciation, regardless of when you bought it. But that's not the only path. New capital improvements you make after January 19, 2025 qualify on their own. Separately, if the building was never cost-segregated, a look-back cost segregation study can reclassify the original HVAC, electrical, flooring, and other short-life components hiding inside a building you've owned for years, and catch up the missed depreciation via Form 3115 (an IRC Section 481(a) adjustment) as a single deduction on this year's return, no amended returns required. Whether that catch-up amount qualifies for the 100% bonus rate depends on when those components were originally placed in service: if the building itself was placed in service after January 19, 2025, the original components can qualify for full 100% bonus depreciation even when the look-back study and Form 3115 are filed later. For buildings placed in service earlier, the catch-up still applies, but at whatever bonus percentage was in effect the year the components were originally placed in service. Talk to your CPA about whether a look-back study makes sense for your specific acquisition date.
Q: What if my business operates at a loss? Can I still claim bonus depreciation?
A: Yes. Bonus depreciation can create or increase a business loss. However, for passive real estate investors (not actively involved in management), passive activity loss limitations may limit how much loss you can deduct in any single year.