Monumental Shift Proposed: The "One, Big, Beautiful Bill", Trump Tax Cuts and 100% Bonus Depreciation for Real Estate Investors
Introduction
The real estate investment landscape stands at the cusp of a potentially seismic shift. A major legislative package, referred to in political circles as "The One, Big, Beautiful Bill" (OBBB), is currently progressing through Congress, and it contains proposals that could redefine tax strategy for property owners for years to come.
Central to these proposed changes—and of immediate, critical interest to every serious real estate investor—is the potential reinstatement of 100% bonus depreciation. This single provision, if enacted, could unlock substantial upfront tax savings and dramatically alter project economics across the board.
As dedicated specialists in cost segregation and advanced tax planning for real estate investors nationwide, we at Maven Cost Segregation are not just passively observing; we are deeply immersed in analyzing every facet of this proposed legislation. To be clear, the OBBB is far more than a routine adjustment to the tax code. Its implications for capital investment, property valuation, and overall market dynamics are potentially profound. Our objective in the sections that follow is to dissect the technical details of the proposed 100% bonus depreciation and illuminate what it could specifically mean for your portfolio and future investment decisions.
However, it cannot be overstated: the OBBB is, at this moment, a proposal. It is NOT yet law. Its passage, its precise timing, and its final provisions remain subject to the complexities of the legislative process. This inherent uncertainty underscores the critical need for your immediate attention and, crucially, your informed engagement as these pivotal discussions unfold in Washington.
Central to these proposed changes—and of immediate, critical interest to every serious real estate investor—is the potential reinstatement of 100% bonus depreciation. This single provision, if enacted, could unlock substantial upfront tax savings and dramatically alter project economics across the board.
As dedicated specialists in cost segregation and advanced tax planning for real estate investors nationwide, we at Maven Cost Segregation are not just passively observing; we are deeply immersed in analyzing every facet of this proposed legislation. To be clear, the OBBB is far more than a routine adjustment to the tax code. Its implications for capital investment, property valuation, and overall market dynamics are potentially profound. Our objective in the sections that follow is to dissect the technical details of the proposed 100% bonus depreciation and illuminate what it could specifically mean for your portfolio and future investment decisions.
However, it cannot be overstated: the OBBB is, at this moment, a proposal. It is NOT yet law. Its passage, its precise timing, and its final provisions remain subject to the complexities of the legislative process. This inherent uncertainty underscores the critical need for your immediate attention and, crucially, your informed engagement as these pivotal discussions unfold in Washington.
Current Bonus Depreciation Rules: The TCJA Phase-Out & Impact on 2024-2025 Tax Planning
To fully appreciate the magnitude of the proposed changes within the "One, Big, Beautiful Bill" (OBBB), it's essential to understand the current trajectory of bonus depreciation. This powerful tax incentive, formally known as the additional first-year depreciation deduction under Internal Revenue Code (IRC) Section 168(k), allows businesses to immediately deduct a significant percentage of the cost of qualifying new and used assets, rather than writing them off incrementally over many years. Qualifying assets typically include tangible personal property with a recovery period of 20 years or less, certain other property like computer software, and, critically for real estate, Qualified Improvement Property (QIP).
The Tax Cuts and Jobs Act (TCJA) of 2017 was a landmark for this provision, temporarily establishing 100% bonus depreciation for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. This created an unprecedented opportunity for immediate expensing, substantially reducing the after-tax cost of capital investments.
However, the TCJA also legislated a gradual phase-out of this benefit. This scheduled decline is the "ticking clock" that real estate investors have been acutely aware of:
The Tax Cuts and Jobs Act (TCJA) of 2017 was a landmark for this provision, temporarily establishing 100% bonus depreciation for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. This created an unprecedented opportunity for immediate expensing, substantially reducing the after-tax cost of capital investments.
However, the TCJA also legislated a gradual phase-out of this benefit. This scheduled decline is the "ticking clock" that real estate investors have been acutely aware of:
- For property placed in service in calendar year 2023, the bonus depreciation rate dropped to 80%.
- For property placed in service in calendar year 2024 (the tax year many are currently planning for or have recently filed), the rate further decreased to 60%.
- Under current law, for property placed in service in this calendar year, 2025, the rate is scheduled to be only 40%.
- Looking ahead, it's set to fall to 20% for property placed in service in 2026.
- Finally, for property placed in service on January 1, 2027, and thereafter, bonus depreciation is scheduled to be 0%, completely eliminated unless new legislation intervenes.
This systematic reduction has had tangible consequences for real estate investors. Investment modeling has become more complex, as projected after-tax returns diminish with each step-down in the bonus rate. Cash flow projections have tightened, with less capital being immediately freed up through upfront deductions. Consequently, the financial viability of some acquisitions, new developments, and significant renovation projects—especially those with substantial components qualifying for bonus depreciation through cost segregation studies—has been increasingly challenged under this phase-out regime. The OBBB's proposal to potentially reverse this trend is, therefore, a development of the highest order.
One Big Beautiful Bill Analysis: Proposed 100% Bonus Depreciation & Section 168(k) Changes for Real Estate
Against the backdrop of a diminishing bonus depreciation allowance, the "One, Big, Beautiful Bill" (OBBB) has been introduced as a substantial legislative package with the potential to significantly alter prevailing tax law. For real estate investors and their advisors, the most salient component of this multifaceted proposal is arguably found in SEC. 111001, titled "Extension of Special Depreciation Allowance for Certain Property." This section directly addresses IRC Section 168(k) and outlines a proposed restoration of 100% bonus depreciation, effectively seeking to reverse the ongoing phase-out for a defined period.
Should this section of the OBBB be enacted as currently drafted, the following key modifications to the special depreciation allowance would apply:
Should this section of the OBBB be enacted as currently drafted, the following key modifications to the special depreciation allowance would apply:
1. Applicable Percentage:
The proposal would reinstate the applicable percentage for bonus depreciation to 100%. This permits the full, immediate expensing of the adjusted basis of qualified property in the year it is placed in service.
2. Eligible Property:
The definition of "qualified property" under IRC Section 168(k) would generally continue to apply. This primarily includes:
- Tangible personal property with a Modified Accelerated Cost Recovery System (MACRS) recovery period of 20 years or less. This is the category where assets identified through a detailed cost segregation study (e.g., specific types of electrical, plumbing, decorative finishes, site work such as paving and landscaping, etc., distinct from the building structure itself) become exceptionally valuable.
- Computer software.
- Water utility property.
- Qualified Improvement Property (QIP): Historically, QIP (certain interior improvements to nonresidential real property) has been a critical asset class for real estate investors. Subsequent to a technical correction to the TCJA, QIP is generally defined as 15-year property, making it eligible for bonus depreciation. The proposed amendments to Section 168(k) would continue to make QIP eligible for the 100% rate, provided it meets all other requirements.
- Certain plants, as specified under existing Section 168(k)(5).
3. Crucial Proposed Operative Dates:
The efficacy of the 100% rate is tightly bound to specific dates outlined in SEC. 111001 of Trump's One Big Beautiful Bill:
- The property must be acquired by the taxpayer AFTER January 19, 2025.
- The property must be placed in service by the taxpayer AFTER January 19, 2025, and BEFORE January 1, 2030.
- For certain property with longer production periods (as described in IRC Section 168(k)(2)(B)) and certain aircraft (IRC Section 168(k)(2)(C)), the placed-in-service deadline is extended to BEFORE January 1, 2031.
- Given the current date (May 2025), these proposed "after January 19, 2025" dates indicate a potential retroactive application for qualifying assets already acquired and placed in service this year.
4. Treatment of Used Property:
The TCJA expanded bonus depreciation eligibility to include used (i.e., not original use) property, a significant departure from prior law. The proposed amendments within the OBBB to Section 168(k) do not appear to rescind this provision. Therefore, it is anticipated that used qualified property would continue to be eligible for the proposed 100% bonus depreciation, provided it meets the acquisition and placed-in-service date requirements.
5. Binding Contract Rule for Acquisition Date:
The proposal (specifically in the new subparagraph (D)(ii) to be added to 168(k)(2) per the provided draft legislative text) clarifies the determination of the acquisition date: "For purposes of clause (i), property shall not be treated as acquired after the date on which a written binding contract is entered into for such acquisition." This underscores the importance of meticulous record-keeping regarding contractual obligations.
6. Interaction with Current Phase-Out Schedule:
If enacted with these parameters, the OBBB’s 100% bonus depreciation provision would effectively supersede the existing phase-out schedule for qualifying property. This means that for assets acquired and placed in service according to the new dates, the currently scheduled 40% rate for 2025 and 20% rate for 2026 would be replaced by the 100% allowance.
These proposed technical adjustments collectively represent a substantial potential shift in the tax treatment of capital expenditures for real estate investors, necessitating careful review and strategic planning.
Maximizing Real Estate Tax Savings: The Strategic Impact of Proposed 100% Bonus Depreciation
The proposed reinstatement of 100% bonus depreciation under Trump's One Big Beautiful Bill is not merely an academic adjustment to tax code; its practical financial implications for real estate investors are extensive and direct. Understanding these impacts is crucial for strategic decision-making.
Unlocking Immediate, Substantial Tax Deductions Under Trump's One Big Beautiful Bill Proposal
The foremost effect of 100% bonus depreciation is the capacity to deduct the entire eligible cost of qualifying property in the year it is placed in service. This results in an immediate and often substantial reduction in current-year taxable income. To illustrate the magnitude: consider a $1 million investment in qualifying assets.
- Under the proposed 100% bonus depreciation, the full $1,000,000 could be deducted.
- Comparatively, under the current 2024 rate of 60%, the deduction would be $600,000.
- Under the existing scheduled rate of 40% for 2025 (which would apply if no legislative changes occur), the deduction would be only $400,000. The delta in upfront tax shield is, therefore, exceptionally significant.
Augmenting Real Estate Cash Flow via Accelerated Depreciation
A direct consequence of larger upfront tax deductions is a reduction in immediate tax liabilities, thereby preserving and increasing current cash flow. This enhanced liquidity provides real estate investors with greater financial flexibility. Capital that would otherwise be allocated to tax payments can be redirected towards:
- New property acquisitions.
- Funding new development or significant renovation projects.
- Making capital improvements to existing assets.
- Servicing or reducing debt. Essentially, 100% bonus depreciation accelerates the return of capital, allowing for a more rapid redeployment into new or existing ventures.
The Indispensable Role of Cost Segregation in Activating 100% Bonus Depreciation
It is critical to understand that bonus depreciation applies to "qualified property," which largely encompasses assets with shorter MACRS recovery periods. Building structures themselves are typically classified as 27.5-year (residential) or 39-year (nonresidential) property and are not directly eligible for bonus depreciation. This is where the technical expertise of a firm like Maven Cost Segregation becomes paramount. Our detailed, engineering-based cost segregation studies meticulously identify and reclassify components of a building or acquisition that qualify for shorter recovery periods—typically 5-year, 7-year, and 15-year assets.
Examples of such reclassified assets include:
Examples of such reclassified assets include:
- 5-Year Property: Carpeting, certain decorative fixtures, specific process-related plumbing/electrical, cabinetry in some instances.
- 7-Year Property: Office furniture and equipment (if part of a furnished rental).
- 15-Year Property: Land improvements (such as paving, curbing, sidewalks, landscaping, and exterior signage) and Qualified Improvement Property (QIP).
Without a cost segregation study, the cost of these shorter-lived assets remains embedded within the longer depreciable life of the building structure, significantly deferring depreciation deductions and preventing them from qualifying for immediate 100% expensing under bonus depreciation. A cost segregation study, therefore, is the analytical key that unlocks the full potential of 100% bonus depreciation for real estate investments.
Fueling Real Estate Investment and Development with Favorable Tax Treatment
The financial uplift from 100% bonus depreciation can significantly improve the economic modeling of real estate projects. By substantially increasing early-year, after-tax cash flows, it can:
- Enhance key project metrics like Net Present Value (NPV) and Internal Rate of Return (IRR).
- Render previously marginal or sub-threshold investment opportunities economically viable.
- Incentivize and support new construction initiatives.
- Encourage more substantial capital improvements and upgrades to existing properties, thereby increasing asset value and utility.
100% Bonus Depreciation as a Shield Against Inflationary Pressures
In an inflationary environment, the time value of money erodes the real value of depreciation deductions that are spread over many years. A $10,000 deduction claimed today is worth more in real terms than a $10,000 deduction claimed ten or twenty years from now. One hundred percent bonus depreciation provides a crucial hedge against this erosion by allowing the full deduction to be realized in the current period, preserving its present value.
One Big Beautiful Bill Note: Proposed 100% Allowance for "Qualified Production Property"
It's also pertinent to note that Trump's One Big Beautiful Bill, in a distinct section (SEC. 111101, proposing a new IRC Sec. 168(n)), introduces a special 100% depreciation allowance for "qualified production property." This generally refers to certain new nonresidential real property placed in service by the taxpayer as an integral part of manufacturing, production, or refining tangible personal property within the United States, subject to specific construction and placed-in-service windows. While this is a separate provision from the general Section 168(k) bonus depreciation, it represents another avenue through which the OBBB proposes full immediate expensing for specific types of real estate investments, particularly in the industrial and manufacturing sectors.
The collective impact of these factors underscores why the potential return to 100% bonus depreciation is being so closely watched by astute real estate professionals.
The collective impact of these factors underscores why the potential return to 100% bonus depreciation is being so closely watched by astute real estate professionals.
Portfolio Impact: Applying Proposed 100% Bonus Depreciation to Commercial, STR, Self-Storage & Multifamily Real Estate
The potential restoration of 100% bonus depreciation, as outlined in the OBBB, is not a one-size-fits-all benefit; its application and impact can vary significantly depending on the type of real estate assets within your portfolio. Understanding these nuances is key to strategic tax planning.
- Commercial Properties:
For owners of office buildings, retail centers, and industrial facilities, 100% bonus depreciation, when coupled with a cost segregation study, offers substantial opportunities. Beyond the building shell (39-year property), significant value lies in components like tenant improvements (TIs) funded by the landlord, which often include substantial 5, 7, and 15-year property. Additionally, common area assets such as specialized lighting, certain flooring, decorative finishes, and dedicated electrical and plumbing systems can be reclassified and immediately expensed. This accelerates deductions, improving cash flow for operations or reinvestment.
- Self-Storage Facilities:
These properties inherently contain a high percentage of non-structural assets ideal for accelerated depreciation. With 100% bonus depreciation, items such as security systems (cameras, access controls), fencing, paving, individual unit partitions/doors (where not deemed structural), site lighting, and office/retail build-outs could be fully deducted in the year placed in service. This can dramatically reduce the tax burden in the initial years of ownership or after a significant expansion or renovation.
- Short-Term Rentals (Airbnbs, VRBOs):
The dynamic nature of STRs, often involving furnished units and frequent upgrades, makes them prime candidates for leveraging 100% bonus depreciation. Furniture, fixtures, and equipment (FF&E)—such as beds, sofas, appliances, and electronics—are typically 5 or 7-year property. Substantial interior improvements and renovations also contain many components that can be segregated into shorter-lived asset classes. The significant upfront deductions generated by 100% bonus depreciation can be particularly impactful for STR operators. When such deductions create a net rental loss, their utility can be further magnified if the investor meets material participation standards or other criteria that allow these STR losses to be characterized as non-passive, potentially offsetting other forms of income. The specifics of non-passive loss treatment are complex and warrant separate, detailed consultation.
- Multifamily/Residential Rentals:
While the primary structure of a residential rental is depreciated over 27.5 years, numerous components qualify for faster write-offs. With 100% bonus depreciation, assets like appliances (stoves, refrigerators, dishwashers – typically 5-year property), carpeting (5-year), specific types of hard flooring, and site improvements (paving, landscaping, fencing) can be immediately expensed. For common areas in larger complexes (e.g., clubhouse furnishings, gym equipment if owned by the property), similar segregation opportunities exist.
- New Construction & Major Renovations:
This is arguably where 100% bonus depreciation delivers its most profound financial impact. In a ground-up construction or gut renovation scenario, a significant portion of the total project cost (often 15-30% or more, depending on the asset type and design) can be attributed to 5, 7, and 15-year property through a detailed cost segregation study performed concurrently with or immediately after project completion. The ability to immediately write off this substantial portion of the newly created or improved asset base can dramatically alter project economics and accelerate capital recovery.
- Large Portfolio Operators:
For investors and firms managing extensive real estate portfolios, the benefits of 100% bonus depreciation are amplified through scale. The consistent application of detailed cost segregation studies across multiple acquisitions, developments, or improvement projects can lead to significant aggregate tax savings and substantially improved portfolio-wide cash flow. This allows for more robust capital allocation strategies, accelerated portfolio growth, and enhanced overall investment returns.
Across all these scenarios, the common denominator is the strategic identification and reclassification of assets. Without a robust engineering-based cost segregation study, the opportunity to maximize the benefits of a potential 100% bonus depreciation environment remains largely untapped.
Legislative Alert: Securing 100% Bonus Depreciation Requires Urgent Real Estate Tax Advocacy
The potential advantages outlined above hinge entirely on the "One, Big, Beautiful Bill" (OBBB) becoming law. This is by no means a certainty. As such, informed and timely action from the real estate investment community is critical.
Maven Cost Segregation’s Position: Advocating for Pro-Growth Tax Policy
At Maven Cost Segregation, we firmly believe the restoration of 100% bonus depreciation is vital for the robust health and continued growth of the real estate sector and the broader U.S. economy. It is a proven policy that directly rewards and incentivizes investment in America.
Our firm—founded by real estate investors, for real estate investors, and backed by in-house certified civil engineers and technical CPAs—is actively engaged in educational efforts and steadfast advocacy supporting this pro-growth tax provision. We understand its profound impact from both a technical and practical investment standpoint.
Our firm—founded by real estate investors, for real estate investors, and backed by in-house certified civil engineers and technical CPAs—is actively engaged in educational efforts and steadfast advocacy supporting this pro-growth tax provision. We understand its profound impact from both a technical and practical investment standpoint.
One Big Beautiful Bill Proposal Status: The Imperative for Timely Legislative Influence
It must be unequivocally understood: the OBBB is currently proposed legislation. It must navigate the full legislative process in Washington, D.C., where many factors will influence its final form and passage. Historically, the period during which lawmakers actively consider and shape such significant legislation can be relatively brief. Your voice, and the collective voice of the industry, matters most during this formative stage.
Call to Action: How Real Estate Investors Can Support 100% Bonus Depreciation
We strongly encourage every real estate professional, investor, property owner, and CPA to contact their U.S. Senators and Representatives immediately to express support for the restoration of 100% bonus depreciation.
When communicating, be clear, concise, and respectful. Focus on the positive economic impacts:
When communicating, be clear, concise, and respectful. Focus on the positive economic impacts:
- U.S. Senators: >https://www.senate.gov/senators/
To find your elected officials:
- U.S. Senators: https://www.senate.gov/senators/
- U.S. Representatives: https://www.house.gov/representatives
Furthermore, consider joining the broader industry movement. Maven Cost Segregation champions the #BringBackBonus initiative; add your support to this collective call for economically sound tax policy. Time is of the essence.
Strategic Tax Planning: Navigating Proposed 100% Bonus Depreciation for Real Estate Investments (2025 Forward)
Given that the "One, Big, Beautiful Bill" (OBBB) and its provisions for 100% bonus depreciation are still proposals, real estate investors find themselves in a period of legislative uncertainty. However, uncertainty does not necessitate inaction. Prudent, proactive steps can help you prepare for potential outcomes and position your portfolio advantageously.
Legislation is inherently fluid, and outcomes can be difficult to predict. Therefore, staying informed through reliable channels and professional advisors is paramount as this bill progresses.
Legislation is inherently fluid, and outcomes can be difficult to predict. Therefore, staying informed through reliable channels and professional advisors is paramount as this bill progresses.
The Importance of Expert Consultation for Bonus Depreciation Scenario Analysis
This is a critical time to engage with your tax advisors to model potential scenarios based on the proposed legislation. Understanding how a return to 100% bonus depreciation could specifically impact your tax liabilities and cash flow is essential for informed decision-making.
The specialists at Maven Cost Segregation can help you understand how proposed 100% bonus depreciation, maximized through a detailed, engineering-based cost segregation study, could impact your existing portfolio and future investment decisions. We provide the detailed engineering and tax insights you need for informed planning, allowing you to quantify the potential benefits for specific assets or projects.
The specialists at Maven Cost Segregation can help you understand how proposed 100% bonus depreciation, maximized through a detailed, engineering-based cost segregation study, could impact your existing portfolio and future investment decisions. We provide the detailed engineering and tax insights you need for informed planning, allowing you to quantify the potential benefits for specific assets or projects.
Reviewing Acquisitions & Projects for 2025 OBBB Bonus Depreciation Eligibility
If the OBBB’s bonus depreciation provisions are enacted as proposed, they would apply to qualifying property acquired and placed in service after January 19, 2025. Therefore, it is advisable to:
- Identify properties or projects currently planned for acquisition or significant improvement for the remainder of 2025 and into the subsequent years covered by the proposal (through 2029).
- Begin preliminary financial analysis on these identified assets, modeling the impact of 100% bonus depreciation versus the current scheduled phase-out (40% for 2025, 20% for 2026). This can help assess changes to projected IRR, cash-on-cash returns, and overall project viability. Such analysis can inform your go/no-go decisions or negotiation stances.
Critical Tax Documentation for Proposed Bonus Depreciation Changes
Meticulous record-keeping is always a cornerstone of sound tax management, but it assumes heightened importance during periods of potential legislative change, especially when specific dates are critical. Ensure you maintain thorough and easily accessible records for:
- Acquisition Dates: Pinpoint the exact date of acquisition.
- Binding Contracts: As the OBBB proposal includes language that "property shall not be treated as acquired after the date on which a written binding contract is entered into for such acquisition," the execution date of any such contract is a vital piece of documentation.
- Placed-in-Service Dates: The date an asset is ready and available for its intended use is fundamental for all depreciation purposes.
While the legislative path ahead is not yet clear, these proactive measures can equip you with the necessary information and preparedness to capitalize on opportunities should they arise.
The OBBB, Bonus Depreciation Outlook, and Your Real Estate Investment Horizon
The "One, Big, Beautiful Bill" and its proposal to reinstate 100% bonus depreciation represent a truly pivotal moment for real estate investors. If enacted, this provision offers a monumental opportunity for significant tax deferral and materially enhanced cash flow, fundamentally improving the economics of acquiring, developing, and improving property.
However, as we have emphasized, the passage of this legislation remains far from certain. Its journey through Congress will be subject to many influences, and robust advocacy from stakeholders like you—the investors and professionals who understand its real-world impact—is essential.
Maven Cost Segregation is unwavering in its commitment to providing cutting-edge analysis and expert, engineering-driven cost segregation services. Our singular focus is to help our clients navigate these complex and evolving tax laws, ensuring you are positioned to maximize your returns and make fully informed investment decisions. We will continue to monitor this legislation with diligence and provide updates as developments occur.
We encourage you to stay connected with Maven Cost Segregation for the latest insights and guidance on this and other critical tax strategies affecting your real estate portfolio.
However, as we have emphasized, the passage of this legislation remains far from certain. Its journey through Congress will be subject to many influences, and robust advocacy from stakeholders like you—the investors and professionals who understand its real-world impact—is essential.
Maven Cost Segregation is unwavering in its commitment to providing cutting-edge analysis and expert, engineering-driven cost segregation services. Our singular focus is to help our clients navigate these complex and evolving tax laws, ensuring you are positioned to maximize your returns and make fully informed investment decisions. We will continue to monitor this legislation with diligence and provide updates as developments occur.
We encourage you to stay connected with Maven Cost Segregation for the latest insights and guidance on this and other critical tax strategies affecting your real estate portfolio.
About the Author
Sean Graham, CPA specializes in cost segregation, tax depreciation, and real estate tax savings. As the Chief Technical CPA at Maven Cost Segregation: Tax Advisors, he has overseen 1000+ cost segregation studies, helping investors maximize deductions.