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USA Tax Glossary
Bonus depreciation is an additional first-year depreciation deduction for eligible property.
Investor Context
For real estate investors, bonus depreciation is often discussed after cost segregation because shorter-lived property identified in a study may be eligible if the law and facts allow it. As of May 14, 2026, IRS guidance under the One Big Beautiful Bill describes a permanent 100% additional first-year depreciation deduction for eligible depreciable property acquired after January 19, 2025.
Why It Matters
It can accelerate deductions into the year eligible property is placed in service.
It does not automatically apply to all real estate or land.
Accelerated depreciation can affect future recapture and sale planning.
Records To Prepare
Acquisition date and placed-in-service date
Asset class and cost basis support
Cost segregation study or asset detail
Election-out decisions, if any
Common Caution
Bonus depreciation eligibility is asset-specific. Do not apply 100% bonus depreciation to land or non-eligible building components without analysis.
Direct Answers
IRS 2026 guidance says the One Big Beautiful Bill provides permanent 100% additional first-year depreciation for eligible depreciable property acquired after January 19, 2025. Eligibility still depends on the property and facts.
Generally, bonus depreciation does not simply apply to the entire residential rental building. It may apply to eligible components or property if properly classified.
Official IRS Reference
IRS: 2026 guidance on additional first-year depreciationRelated Terms
Cost segregation is an analysis that separates parts of real estate into components with different depreciation treatment, often to identify shorter-lived property within a larger building acquisition or improvement.
Section 179 lets eligible taxpayers elect to deduct the cost of certain qualifying property in the year it is placed in service, subject to dollar, phaseout, business-use, and taxable-income limits.
Depreciation recapture rules can cause part of the gain on sale of depreciated property to be taxed differently because depreciation deductions were allowed or allowable before sale.
