The Return of Full Expensing: How the One Big Beautiful Bill Act Revived 100% Bonus Depreciation
By Cody C. Heimerdinger, CPA
The Bonus Depreciation Revival
Real estate investors just got a very pleasant surprise.
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA), legislation that restores and makes permanent 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025.
This change effectively reverses the Tax Cuts and Jobs Act of 2017 (TCJA) phaseout, which had been reducing the deduction from 100% in 2022 down to 40% for 2025 and 20% for 2026. For assets acquired under the new law, the clock resets, and the entire qualifying cost can once again be written off in year one.
Timing Matters: The “Acquired and Placed in Service” Rules
Eligibility depends heavily on when and how property is acquired:
- Written Binding Contracts – If a binding purchase agreement was signed before January 20, 2025, the property generally remains under the old TCJA phase-down rules.
- Contracts After January 19, 2025 – These qualify for 100% expensing if the property is placed in service under OBBBA.
- Off-the-Shelf Assets – Assets such as appliances, equipment, and furniture qualify once physical possession or control occurs after that date.
The IRS will expect meticulous documentation proving that the property qualifies under OBBBA’s acquisition window.
Self-Constructed Property: When the Clock Officially Starts
For ground-up developments or custom builds, timing is everything.
Under OBBBA, 100% bonus depreciation applies to property constructed after January 19, 2025, but “construction” begins only when physical work of a significant nature starts. Planning, design, and financing don’t count.
- Significant physical work includes site preparation, grading, foundation work, or utility installation, not blueprints or loan closings.
- Even if a third party handles the build, the key date is when their crews start actual onsite work.
- A safe harbor allows construction to be considered “begun” once more than 10% of the project’s total cost has been paid or incurred.
Practically speaking: to qualify for full expensing under OBBBA, developers must ensure substantial construction activity or the 10% safe-harbor threshold occurs after January 19, 2025.
Properly documenting those milestones can make the difference between 100% expensing and a phased-down deduction.
Cost Segregation Still Leads the Show
Even with full bonus depreciation reinstated, the cost segregation study remains the driver of value. It allows investors to:
- Identify 5-, 7-, and 15-year property components within real estate acquisitions
- Accelerate those components for immediate expensing under OBBBA
- Create potentially six-figure first-year deductions that can dramatically improve project IRRs
For 2025 and beyond, the winning combination is cost segregation + OBBBA = maximum tax leverage.
What This Means for Investors
With bonus depreciation now permanent, investors regain a long-term planning advantage.
Strategies to consider:
- Ensure acquisitions or renovations to align with the new “placed in service” standards
- Pair cost segregation with active participation structures to unlock non-passive loss treatment
- Integrate depreciation planning into financing models, boosting after-tax returns and cash flow
- Revisit prior year acquisitions, it’s worth reviewing recent purchases to identify any depreciation opportunities on shorter-life components through a cost segregation study. Note, qualifying property placed in service before January 20, 2025 remains subject to the TCJA phase-down schedule, not the new OBBBA 100% expensing rules.
The permanency of OBBBA simplifies long-term modeling and restores confidence in the accelerated depreciation landscape, something investors and developers have sorely missed since the TCJA phase-down began.
Documentation: Your Best Defense
As with any major tax incentive, substantiation remains key. Maintain detailed acquisition files, including:
- Signed and dated binding contracts
- Payment records
- Cost segregation reports
- Construction start and completion documentation
Proper documentation ensures your deductions withstand scrutiny and that your acquisitions align with OBBBA’s eligibility window.
How Keystone CPAs Can Help
Our Tax Strategy team at Keystone are already helping clients capitalize on OBBBA. We combine engineering-driven cost segregation studies with proactive structuring to ensure deductions are maximized, defensible, and aligned with your investment objectives.
If you’ve acquired or plan to acquire property in 2025, it’s time to revisit your depreciation strategy under this new law.
Contact Keystone CPAs now at 775-786-4900 to explore how permanent 100% bonus depreciation can accelerate your portfolio’s after-tax returns.