# OBBBA Restored Permanent 100% Bonus Depreciation

URL: https://elevatedtaxstrategies.com/tax-planning/obbba-permanent-bonus-depreciation/
Markdown: https://elevatedtaxstrategies.com/tax-planning/obbba-permanent-bonus-depreciation.md
Category: Tax Planning
Published: 2026-05-04
Author: Ramon Liriano Jr.

> OBBBA permanently restored 100% bonus depreciation for property acquired after Jan 19, 2025. Here's the eligible property, the transition rules.

## TLDR

OBBBA permanently restored **100% bonus depreciation** for qualifying property acquired after January 19, 2025. The phase-down schedule that was running (40% in 2025, 20% in 2026, 0% by 2027) is dead for new property. Property with a recovery period of 20 years or less, equipment, vehicles, furniture, land improvements, the personal-property buckets in cost segregation, gets fully deducted in the year it's placed in service. For real estate investors running cost seg + STR loophole, this restored the headline tax move of the decade.

In this guide, you'll learn:

- See the phase-down schedule that OBBBA killed (and the Jan 19, 2025 transition cutoff)
- Recognize what qualifies: equipment, vehicles, furniture, land improvements, the 5/7/15-year cost seg buckets
- Calculate the year-one delta for a $500K rental: $84K of additional tax savings vs. the pre-OBBBA 40% rate
- Understand how 100% bonus interacts with Section 179 ($1.16M expensing) for typical small-business equipment buys
- Get the Section 481(a) look-back path for catching up missed cost seg on properties owned 2+ years

- **100%**: Bonus depreciation (Permanent, phase-down repealed)
- **Jan 19, 2025**: Acquisition cutoff (Property acquired after this date)
- **≤ 20 yrs**: Recovery period to qualify (Equipment, vehicles, cost-seg buckets)

Source: IRC §168(k) as amended by the One Big Beautiful Bill Act (signed July 4, 2025).

## What changed and when

Before OBBBA, bonus depreciation was phasing down:

| Year property placed in service | Bonus depreciation rate |
| ------------------------------- | ----------------------- |
| 2017–2022                       | 100%                    |
| 2023                            | 80%                     |
| 2024                            | 60%                     |
| 2025 (pre-OBBBA)                | 40%                     |
| 2026                            | 20%                     |
| 2027+                           | 0%                      |

OBBBA (signed July 4, 2025) eliminated the phase-down for property **acquired after January 19, 2025:** meaning the rate goes back to 100% and stays there permanently.

**Important transition rule:** property placed in service between January 1, 2025 and January 19, 2025 remains subject to the pre-OBBBA phase-down (generally 40%, 60% for certain long-production-period property). The cutoff date matters for early-2025 acquisitions.

## What qualifies for 100% bonus depreciation

Under IRC Section 168(k), qualifying property must:

1. **Have a recovery period of 20 years or less** under MACRS
2. **Be acquired and placed in service after the effective date**
3. **Be the original use by the taxpayer** OR meet specific used-property rules
4. **Not be excluded property** (certain regulated utilities, foreign-use property, etc.)

The property categories that qualify:

- **5-year property**: vehicles, computers, office equipment, certain machinery
- **7-year property**: office furniture, fixtures, agricultural machinery
- **15-year property**: land improvements, qualified improvement property, certain leasehold improvements
- **5/7/15-year cost segregation buckets**: the personal-property and land-improvement components of real estate identified through cost seg studies

**Critically: this includes the cost-seg-eligible portions of rental properties and commercial real estate.** A $500K residential rental that gets cost seg'd typically has ~$140K-$160K of basis allocated to 5/7/15-year property. Under 100% bonus, that entire allocated basis deducts in year one.

## Why this matters for real estate investors

The combination of cost segregation + 100% bonus depreciation is the highest-leverage legal tax move in the U.S. tax code for high-income households who own rental real estate.

**$500K residential rental, $140K cost-seg-eligible basis, year-one impact**

|  | Pre-OBBBA (40% bonus) | Post-OBBBA (100% bonus) |
| --- | --- | --- |
| Year-1 bonus on cost-seg basis | $140K × 40% = $56K | $140K × 100% = **$140K** |
| Plus structure depreciation (27.5-yr) | ~$13K | ~$13K |
| Total year-1 deduction | ~$69K | **~$153K** |
| Incremental year-1 tax savings (32% bracket) | - | **~$84K** |

**Pre-OBBBA (under the 40% phase-down):**

- $500K residential rental, cost-seg-eligible basis $140K
- Year-1 bonus depreciation: $140K × 40% = $56K (with the remaining $84K depreciated over the original 5/7/15-year schedules)
- Plus standard 27.5-year structure depreciation: ~$13K

**Post-OBBBA (100% bonus):**

- Same property: $140K × 100% = $140K immediate year-1 deduction
- Plus $13K structure depreciation
- **Total year-1 deduction: ~$153K vs. ~$69K before**

For a taxpayer in the 32% bracket using [STR loophole](https://elevatedtaxstrategies.com/real-estate-investing/str-loophole-qualification/) or [REPS](https://elevatedtaxstrategies.com/real-estate-investing/reps-qualification-rules/) to apply the loss against W-2 income, this is **~$84K of incremental year-one tax savings** vs. what was scheduled before OBBBA.

[See the full cost seg fundamentals guide](https://elevatedtaxstrategies.com/real-estate-investing/cost-seg-fundamentals/) for the mechanics.

## Why this matters for equipment-heavy businesses

Beyond real estate, 100% bonus depreciation matters for:

**Construction companies:** trucks (over 6,000 lbs GVWR can get full Section 179 + bonus on top), heavy equipment, tools, machinery. A $180K dump truck purchased and placed in service after Jan 19, 2025 deducts in full in year one.

**Trucking owner-operators:** Class 8 tractors, trailers, refrigeration units, telematics equipment.

**Medical + dental practices:** chairs, x-ray equipment, diagnostic devices, technology. A $200K dental chair-and-x-ray purchase fully deducts year one.

**Manufacturers:** machinery, production equipment, robotics, conveyance systems.

**Landscapers:** bucket trucks, chippers, mowers, irrigation equipment.

For high-income business owners in equipment-heavy industries, **year of purchase becomes a tax-planning lever**. Timing a $300K equipment buy into a high-income year delivers a six-figure tax shelter at the top brackets.

## How it interacts with Section 179

Section 179 lets you elect to expense up to ~$1.16M of qualifying property (2024 limits, indexed annually) in the year of purchase. Bonus depreciation is a separate provision that takes over after Section 179 is maxed.

**The interaction:**

1. Apply Section 179 first (up to the limit, with the phase-out above ~$2.89M of total purchases)
2. Bonus depreciation applies to remaining basis at 100%
3. Result: same as full expensing for most small + mid-business purchases

For very large equipment buys (over Section 179 phase-out), bonus depreciation becomes the primary mechanism. For most ETS clients (purchases under $1M), Section 179 alone captures the deduction.

## Look-back planning: amend prior returns?

For property already placed in service:

- **Property placed in service 2023-2024 (during phase-down)**: cannot retroactively benefit from OBBBA's 100% rule. The phase-down rates applied to those years.
- **Property placed in service Jan 1-19, 2025**: transition rule, still subject to phase-down (40%).
- **Property placed in service after Jan 19, 2025**: 100% applies.

You generally cannot amend a prior return to claim more bonus depreciation than was available under the law at the time of placing in service. However, **Section 481(a) look-back studies for cost segregation** remain valid. If you never ran cost seg on a property you've owned for years, you can do a look-back study and catch up the missed accelerated depreciation in the current year (without amending), and the catch-up uses current law rates.

For a property you've owned since 2018 that's never been cost seg'd, the look-back in 2026 would apply 100% bonus to the previously-unaccelerated 5/7/15-year buckets. That's a one-time event with potentially six-figure tax savings.

## What we do when you engage

For OBBBA-driven cost seg + equipment depreciation engagements:

1. **Discovery call:** confirm the property/equipment qualifies, model year-one tax savings
2. **Cost segregation study** (for real estate), in-house for sub-$1M properties; engineering-firm partner for $1M+
3. **Section 481(a) look-back analysis** (for properties owned 2+ years without cost seg), model the catch-up deduction
4. **Year-one tax projection:** including STR/REPS unlock if applicable
5. **Year-end planning:** time additional equipment purchases into high-income years to maximize the deduction value

Engagement scope: $5,000-$15,000 for a single-property cost seg engagement; $10,000+ for complex multi-property + look-back work; rolled into broader [tax-planning advisory](https://elevatedtaxstrategies.com/services/tax-planning-advisory/) retainer for ongoing clients.

## Common questions

**Does the 100% rule apply to used property?**
Yes, with conditions. Used property qualifies for bonus depreciation if (a) you didn't previously use it (no prior depreciation taken by you), (b) it wasn't acquired from a related party, and (c) the basis isn't determined by reference to the seller's basis. Most arm's-length purchases of used equipment qualify.

**What if I bought property in 2024:** can I still claim 100%?
No. 2024 purchases got 60% bonus. The OBBBA rule applies to property acquired after Jan 19, 2025. Earlier purchases are locked into their then-current rate.

**Can I do cost seg on a property I bought in 2025 before Jan 19?**
You can do the cost seg study, but the year-1 deduction follows the pre-OBBBA 40% phase-down rate for that property. Still better than no cost seg, but smaller than post-Jan-19 purchases.

**Does this benefit me if I have no other income to offset?**
The deduction itself works regardless. But to USE the loss in the current year, you need offsetting income: passive income (other rentals), STR loophole income (to offset W-2), REPS (to characterize all rentals as non-passive), or active business income. Without one of those, the loss carries forward as suspended passive loss.

**What about depreciation recapture when I sell?**
Recapture applies regardless of bonus rate. Section 1245 recapture (personal property + 15-year land improvements) at ordinary rates; Section 1250 recapture (structure portion) at 25% federal cap. [1031 exchange](https://elevatedtaxstrategies.com/real-estate-investing/1031-exchange-mechanics/) defers all of this.

**Is the IRS guidance on OBBBA bonus depreciation complete?**
Treasury and the IRS issued interim guidance in late 2025 (Notice and Rev. Proc. updates available at [irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill](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)). Some operational details continue to evolve.

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If you own real estate or your business buys significant equipment, OBBBA's 100% bonus depreciation likely changes your year-one tax position by five figures or more. The [Discovery call](https://elevatedtaxstrategies.com/discovery/) is the right next step. We model the year-one impact + cost seg engagement against your specific facts.