There’s a lot for businesses to celebrate in the new tax legislation—affectionately dubbed the One, “Big Beautiful Bill”—recently passed by the House and now under consideration in the Senate. Packed with pro-business provisions, one headline-grabbing highlight is the return of 100% bonus depreciation—a powerful incentive that had been gradually phased down starting in 2023.
For real estate investors, developers, and business owners with capital-intensive operations, this is more than a minor tweak—it’s a game-changer for tax planning and cash flow.
What’s Bonus Depreciation, and Why Should You Care?
Bonus depreciation allows taxpayers to immediately deduct a large percentage of the cost of qualifying business assets—like equipment, furniture, and certain building components—rather than depreciating them slowly over many years.
Under the 2017 Tax Cuts and Jobs Act (TCJA), bonus depreciation was increased to 100% for assets placed in service between 2017 and 2022. But starting in 2023, that deduction began tapering off:
- 80% in 2023
- 60% in 2024
- 40% in 2025
- 20% in 2026
- Gone in 2027
This scheduled sunset posed real consequences for businesses investing in property, plant, and equipment—reducing the near-term tax benefits and increasing the need for more complex tax strategies.
The new House bill hits the rewind button—restoring 100% bonus depreciation retroactively to the beginning of 2023 and extending it through 2025.
Why This Matters Now?
- Immediate Tax Savings : With 100% bonus depreciation back on the table, companies can deduct the full cost of qualifying assets in the year they’re placed in service. That means a direct reduction in taxable income and more cash retained—critical in today’s capital-constrained environment.
- Real Estate Just Got More Profitable: Through a cost segregation study, commercial property owners can reclassify portions of a building into shorter-lived assets eligible for bonus depreciation. With the 100% rate back, the ROI on cost seg jumps dramatically.
- Retroactive Windfall for 2023: Because the bill makes the 100% provision retroactive to January 1, 2023, businesses that made qualifying investments last year may now be eligible to amend returns or capture refunds based on the updated depreciation rules.
- Time-Sensitive Opportunities: This reinstated incentive only lasts through 2025—unless extended again—so now is the time to review portfolios, revisit asset purchases, and accelerate planned investments to capitalize before the clock runs out again.
What Should You Do Now?
- Review 2023 asset purchases: If you acquired or placed assets in service last year, re-run the numbers with 100% bonus in mind.
- Get a cost segregation study: Real estate assets that previously saw diminishing benefits under bonus depreciation may now unlock six or seven figures in tax deductions.
- Consider amending returns: If the law is enacted, it may be possible to amend 2023 returns and generate immediate refunds or carrybacks.
- Plan acquisitions smartly through 2025: With this window reopened, any major capex or property acquisition should be structured to maximize depreciation deductions before the phaseout resumes.
Bottom Line
The “Big Beautiful Bill” lives up to its name for taxpayers who know how to leverage it. Bonus depreciation’s full return is not just a line item—it’s a strategic opportunity to enhance cash flow, improve ROI, and reduce tax burdens in a big way. But the window may be short. Now is the time to act. Connect with us today to get started.
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