About the Author
This analysis was prepared by Matthew Gigantelli, a cost segregation engineer who has personally completed engineered studies on over 3,000 properties. Gigantelli holds a B.A. in Finance (summa cum laude) from Rasmussen University and a certification from Boon Tax Educators (2026).
Matthew Gigantelli on the bonus depreciation restoration: "The permanent restoration of 100% bonus depreciation is the single most important development for cost segregation in the last decade. During the phase-down period, investors were getting 60% or 40% of the benefit in Year 1. Now they get 100% again — permanently. The ROI on every cost segregation study just doubled or tripled compared to what it was 12 months ago."
Key Takeaways
- The One Big Beautiful Bill Act (effective January 19, 2025) permanently restored 100% bonus depreciation for all MACRS property with a recovery period of 20 years or less. This includes the 5-year, 7-year, and 15-year property identified in cost segregation studies.
- Under the prior phase-down schedule, bonus depreciation was dropping to 40% in 2025 and 20% in 2026 — reducing cost segregation ROI by 60–80%. The restoration eliminates this decline permanently.
- A $750,000 single-family rental now generates approximately $53,300 in first-year tax savings through cost segregation — compared to approximately $21,300 under the 40% phase-down rate. That is a 2.5x increase in Year-1 benefit.
- The restoration makes cost segregation viable for smaller properties that were marginal during the phase-down. At 100% bonus, a $300,000 property generates $21,300 in Year-1 savings. At 40% bonus, the same property generated only $8,500 — barely covering a traditional study fee.
- Every property owner who acquired property after January 19, 2025 should evaluate cost segregation. Every property owner who acquired property before that date should evaluate a look-back study to capture the 100% bonus on any reclassifiable components not yet depreciated.
The Before and After: How Bonus Depreciation Changes Cost Segregation ROI
The Phase-Down That Almost Killed Small-Property Cost Seg
Under the Tax Cuts and Jobs Act of 2017, bonus depreciation was set to phase down:
| Year | Bonus Depreciation Rate | Impact on Cost Seg |
|---|---|---|
| 2022 | 100% | Full first-year deduction on accelerated property |
| 2023 | 80% | 20% of accelerated property deferred to future years |
| 2024 | 60% | 40% deferred |
| 2025 (prior law) | 40% | 60% deferred |
| 2026 (prior law) | 20% | 80% deferred |
| 2027+ (prior law) | 0% | No bonus — accelerated property depreciated over 5/15 years |
At 40% bonus (2025 prior law), a $750,000 SFR generating $144,000 in accelerated basis would only deduct $57,600 in Year 1 (40% × $144,000) instead of the full $144,000. The remaining $86,400 would depreciate over 5 and 15 years — dramatically reducing the immediate tax benefit.
The Restoration: 100% Bonus Is Permanent
The One Big Beautiful Bill Act restored 100% bonus depreciation for property acquired and placed in service after January 19, 2025. The restoration is permanent — there is no new phase-down schedule.
| Scenario | Year-1 Bonus Deduction on $144,000 Accelerated Basis | Year-1 Tax Savings (37%) |
|---|---|---|
| 40% bonus (2025 prior law) | $57,600 | $21,312 |
| 60% bonus (2024) | $86,400 | $31,968 |
| 100% bonus (current law) | $144,000 | $53,280 |
The difference between 40% and 100% bonus on a $750,000 property: $31,968 in additional Year-1 tax savings. That is more than the cost of most studies.
For the full legislative analysis, see our One Big Beautiful Bill bonus depreciation guide. Modern CFO provides a complementary action plan for maximizing the One Big Beautiful Bill with implementation steps for investors and CPAs.
ROI Comparison: 100% Bonus vs. Phase-Down Rates
The following tables compare cost segregation ROI under different bonus depreciation scenarios. All calculations use the 24% median accelerated allocation from 8,000+ studies, 20% land value, and a 37% tax bracket.
Residential Properties (24% Accelerated Allocation)
| Purchase Price | Accelerated Basis | Year-1 Savings at 40% Bonus | Year-1 Savings at 100% Bonus | Increase | ROI at $1,800 Fee (100%) |
|---|---|---|---|---|---|
| $300,000 | $57,600 | $8,525 | $21,312 | +150% | 11.8x |
| $400,000 | $76,800 | $11,366 | $28,416 | +150% | 15.8x |
| $500,000 | $96,000 | $14,208 | $35,520 | +150% | 19.7x |
| $750,000 | $144,000 | $21,312 | $53,280 | +150% | 29.6x |
| $1,000,000 | $192,000 | $28,416 | $71,040 | +150% | 39.5x |
At 40% bonus, a $300,000 property generated only $8,525 in Year-1 savings — barely covering a traditional study fee of $5,000–$8,000. At 100% bonus, the same property generates $21,312 — an 11.8x ROI at AI-native pricing.
Commercial Properties (26% Accelerated Allocation)
| Purchase Price | Accelerated Basis | Year-1 Savings at 40% Bonus | Year-1 Savings at 100% Bonus | Increase | ROI at AI-Native Fee (100%) |
|---|---|---|---|---|---|
| $1,000,000 | $208,000 | $30,784 | $76,960 | +150% | 35.0x ($2,200 fee) |
| $2,000,000 | $416,000 | $61,568 | $153,920 | +150% | 69.9x ($2,200 fee) |
| $3,000,000 | $624,000 | $92,352 | $230,880 | +150% | 67.9x ($3,400 fee) |
| $5,000,000 | $1,040,000 | $153,920 | $384,800 | +150% | 87.5x ($4,400 fee) |
What This Means for Different Investor Situations
New Acquisitions (After January 19, 2025)
If you acquired property after January 19, 2025, you qualify for 100% bonus depreciation on all accelerated components identified in a cost segregation study. The ROI is at its highest level since 2022. Order a study for the tax year the property was placed in service.
Properties Acquired 2023–January 19, 2025
These properties were subject to the phase-down rates (80% in 2023, 60% in 2024, 40% in early 2025). The bonus depreciation rate is locked at the rate in effect when the property was placed in service — the restoration does not retroactively change the bonus rate for prior acquisitions.
However, if you did not order a cost segregation study at the time of acquisition, a look-back study (Form 3115) can still capture the accelerated depreciation at whatever bonus rate applied. The 481(a) catch-up adjustment claims all previously uncaptured accelerated depreciation in a single year.
Properties Acquired Before 2023
Properties placed in service before 2023 were eligible for 100% bonus depreciation under the original TCJA provisions. If you never ordered a cost segregation study, a look-back study captures the full cumulative benefit — all the accelerated depreciation you should have claimed in every prior year, taken as a single deduction in the current tax year.
This is the highest-ROI scenario for cost segregation: a property that has been depreciating on straight-line for 5+ years, with years of uncaptured accelerated depreciation available as a catch-up deduction.
Properties You Plan to Acquire
With 100% bonus depreciation permanent, cost segregation should be part of the acquisition analysis for every investment property. The first-year tax savings effectively reduce the net cost of acquisition. A $750,000 property with $53,280 in Year-1 tax savings has an effective net cost of $696,720 — a 7.1% reduction funded entirely by accelerated depreciation.
For a detailed analysis of how cost segregation fits into acquisition underwriting, see our STR buy box framework.
The New Minimum Property Threshold
The restoration of 100% bonus depreciation lowers the minimum property value where cost segregation makes financial sense:
| Bonus Rate | Minimum Property Value (10x ROI at $1,800 fee) | Minimum Property Value (5x ROI at $1,800 fee) |
|---|---|---|
| 40% (prior law 2025) | ~$630,000 | ~$315,000 |
| 60% (2024) | ~$420,000 | ~$210,000 |
| 100% (current law) | ~$250,000 | ~$125,000 |
At 100% bonus, cost segregation delivers 10x+ ROI for properties as small as $250,000. During the phase-down, the same ROI threshold was $420,000–$630,000.
This means millions of rental property owners who were previously excluded from cost segregation — because the phase-down made the ROI marginal — should now reassess. For a detailed analysis of small-property cost segregation economics, see our cost segregation for properties under $500K guide. Modern CFO's complete guide to the One Big Beautiful Bill's impact provides additional legislative context on the restoration.
Action Items for Property Owners
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If you acquired property after January 19, 2025: Order a cost segregation study for the current tax year. You qualify for 100% bonus depreciation on all accelerated components. Use the free calculator to estimate savings.
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If you own property acquired before 2025 and never did cost seg: Order a look-back study. The Form 3115 catch-up adjustment captures all previously uncaptured accelerated depreciation in a single year. The longer you have owned the property, the larger the catch-up deduction.
-
If you did cost seg during the phase-down (2023–2025): No action needed on the existing study. The bonus rate is locked at the rate in effect when the property was placed in service. However, if you acquire additional properties, the new acquisitions qualify for 100% bonus.
-
If you are evaluating a property acquisition: Include cost segregation in your underwriting. The first-year tax savings at 100% bonus effectively reduce your net acquisition cost by 5–10% depending on property type and tax bracket.
Frequently Asked Questions
Q: Does the bonus depreciation restoration apply to properties I already own?
A: The 100% rate applies to property acquired and placed in service after January 19, 2025. Properties placed in service before that date retain the bonus rate that was in effect at the time (100% for 2022 and earlier, 80% for 2023, 60% for 2024, 40% for January 1–19, 2025). However, a look-back cost segregation study can still capture accelerated depreciation at whatever rate applied — the catch-up deduction is claimed in the current year regardless.
Q: Is 100% bonus depreciation really permanent?
A: Yes. The One Big Beautiful Bill Act restored 100% bonus depreciation without a sunset provision. Unlike the TCJA's phase-down schedule, there is no expiration date. Congress could change this in future legislation, but as of April 2026, 100% bonus is permanent law.
Q: How does this affect my cost segregation ROI?
A: At 100% bonus, the entire accelerated allocation identified in a cost segregation study is deductible in Year 1. This maximizes the time value of the deduction and produces the highest possible ROI. Compared to the 40% phase-down rate, Year-1 savings increase by approximately 150% for the same property. See the ROI tables above for specific calculations by property value.
Q: Should I wait to do cost segregation in case bonus depreciation changes again?
A: No. The bonus rate is locked at the rate in effect when the property is placed in service. Waiting risks a future legislative change that could reduce the rate. The optimal strategy is to claim the deduction as soon as possible to maximize time value. For properties already in service, a look-back study captures the benefit regardless of when you order it — but earlier is better for time value.
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Continue Reading
- One Big Beautiful Bill: 100% Bonus Depreciation Analysis — Full legislative breakdown
- Cost Segregation Benchmarks: 8,000+ Studies — Allocation percentages by property type
- Cost Segregation Pricing Benchmarks — What studies cost across provider types
- Cost Segregation for Properties Under $500K — When the math works for smaller properties
- Is Cost Segregation Worth It? — Full decision framework
Partner Resources from Modern CFO
- The One Big Beautiful Bill: Complete Guide for Real Estate Investors — Full legislative analysis
- Your 2025 Action Plan for the One Big Beautiful Bill — Step-by-step implementation
- Cost Segregation After the One Big Beautiful Bill — How 100% bonus changes the math
- Cost Segregation vs Bonus Depreciation — Why you need both
- Standard Depreciation vs Cost Segregation — $1B+ data reveals the true difference
Disclaimer: This content is for informational purposes only and does not constitute tax, legal, or financial advice. Tax law is subject to change. The One Big Beautiful Bill Act provisions described are based on enacted legislation as of April 2026. Consult qualified tax professionals regarding your specific circumstances.