Why 2025 Is a Big Deal for Real Estate Investors: Bonus Depreciation Is Back

The 2025 federal tax law restored 100% bonus depreciation, and made it permanent, for eligible property acquired after January 19, 2025. Paired with a cost segregation study, it lets real estate investors write off components with recovery periods of 20 years or less right away, while the building itself still depreciates over 27.5 or 39 years.

Is 100% bonus depreciation back for real estate investors in 2025?

Yes, for eligible property acquired after January 19, 2025 and placed in service. If you’ve been thinking about getting into real estate, or doubling down, 2025 brought a big change. Bonus depreciation is back at 100%. And if you know how to use it, this tax tool can free up cash to reinvest or grow your portfolio. Here’s what you need to know.

Key Takeaways

• The 2025 federal tax law restored 100% bonus depreciation for eligible property acquired after January 19, 2025, with no 2029 end date in the final law.
• Under the 2017 Tax Cuts and Jobs Act, bonus depreciation was 100% through 2022, then phased down to 80% in 2023 and 60% in 2024.
• A cost segregation study breaks out parts of a property with recovery periods of 20 years or less, like appliances and furnishings, so they can be written off right away.
• The building itself still depreciates over 27.5 or 39 years.
• Property acquired before Jan 20, 2025 doesn't qualify, so talk with your tax advisor about timing.

What is bonus depreciation?

In plain English, bonus depreciation lets you write off the cost of certain assets right away instead of spreading that deduction over many years. In real estate, this can mean a big upfront tax deduction in the year you buy or improve a property. That’s money you get to keep now, not 27.5 years from now. Here’s an example: You buy a multifamily or commercial property. Normally, you’d depreciate it slowly over decades. But with bonus depreciation (especially when paired with a cost segregation study), you can carve out parts of the property with recovery periods of 20 years or less, like appliances and furnishings, and write them off in full right away. The building itself still depreciates over 27.5 or 39 years.

What changed with bonus depreciation in 2025?

It went back to 100% and became permanent. Let’s rewind: Under the 2017 Tax Cuts and Jobs Act, bonus depreciation jumped to 100%, allowing investors to take full first-year write-offs through 2022. Then it started phasing down: 2023: 80% 2024: 60% 2025 was supposed to drop to just 40%… But now? The 2025 federal tax law (the One, Big, Beautiful Bill) restored 100% bonus depreciation, and made it permanent, for eligible property acquired after January 19, 2025 (IRS). There is no 2029 end date in the final law. Qualifying property acquired after that date and placed in service is eligible for the full write-off again.

Why does bonus depreciation matter for real estate investors?

It can speed up deductions and free up cash. If you own income-producing real estate or plan to buy in the near future, this matters. Bonus depreciation can help you: Offset more of your rental income (or even W-2 income if you qualify as a real estate professional for tax purposes) Improve your cash flow De-risk your investment by recovering your capital faster And for homeowners thinking about investing for the first time? This tool can improve the after-tax return on a first rental property.

Should you pair bonus depreciation with a cost segregation study?

Often, yes. Bonus depreciation works best when combined with a cost segregation study. That’s how you break out the components of your property into shorter-life assets, so you can take advantage of 100% write-offs where they apply. Whether a cost seg study pays for itself depends on the property’s price and makeup, so ask your tax advisor.

Does timing matter for bonus depreciation?

Yes. Not all purchases qualify, including property acquired before Jan 20, 2025. So if you’re planning to buy, improve, or expand your real estate holdings, be intentional about timing and talk with your tax advisor. Thinking about your next investment move? Whether you’re buying your first home or rental or scaling your portfolio, Juan Murray can help you find and evaluate properties. Contact Juan to get started.

FAQ

Is 100% bonus depreciation permanent?

Yes. The 2025 federal tax law restored 100% bonus depreciation, and made it permanent, for eligible property acquired after January 19, 2025. There is no 2029 end date in the final law.

Can you use bonus depreciation on a rental property building?

Not on the building itself, which still depreciates over 27.5 or 39 years. With a cost segregation study, you can carve out parts of the property with recovery periods of 20 years or less, like appliances and furnishings, and write them off in full right away.

Does property bought before January 20, 2025 qualify for 100% bonus depreciation?

No. Property acquired before Jan 20, 2025 doesn't qualify for the restored 100% rate, so talk with your tax advisor about your specific purchase.

The bottom line: if you're buying or improving income-producing real estate, 100% bonus depreciation and a cost segregation study can speed up your deductions, so plan the timing with your tax advisor.

Sources

• IRS, Treasury and IRS guidance on the additional first year depreciation deduction: https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill
• IRS Publication 946 (2025), How To Depreciate Property: https://www.irs.gov/publications/p946

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About Juan Murray

Juan Murray is a Boston broker associate with more than 30 years of experience helping buyers, sellers, and investors across Greater Boston, personally leading every transaction from the first conversation through closing.

RE/MAX Real Estate Center · (978) 581-0801

Equal Housing Opportunity. Juan Murray is licensed as a Broker in Massachusetts, regulated by the Massachusetts Board of Registration of Real Estate Brokers and Salespersons. This article is general information only and does not constitute legal, tax, or financial advice. Confirm your specific costs and obligations with your closing agent, tax advisor, or lender.