Cost Segregation + Bonus Depreciation Under OBBBA 2026
The phase-down is gone. What matters now is the acquisition date, not the closing date.
The One Big Beautiful Bill Act ended the bonus depreciation phase-down and restored a permanent 100 percent first-year deduction for qualifying property acquired after January 19, 2025. For cost segregation this removes the deadline that drove studies for years, and replaces it with a single question that decides the percentage applied: when was the property acquired?
What Changed
Under the Tax Cuts and Jobs Act, bonus depreciation was scheduled to decline from 100 percent to 80 percent in 2023, 60 percent in 2024, 40 percent in 2025, 20 percent in 2026, and zero thereafter. Every study was being run against a shrinking benefit and a closing window.
The OBBBA removed that schedule. For qualifying property acquired after January 19, 2025 and placed in service thereafter, the rate is 100 percent and permanent. There is no expiration to plan around.
Why This Changes Cost Segregation Economics
Cost segregation and bonus depreciation work together: the study identifies which portions of a building belong in 5, 7, and 15-year categories, and bonus depreciation determines how much of that reclassified amount is deductible immediately. At a 100 percent rate, every reclassified dollar is deductible in year one.
Two practical effects follow. Studies on smaller properties now clear their cost more easily, because the first-year benefit is at full strength rather than a declining fraction. And the timing pressure is gone, which means a study can be scheduled when it fits the owner's tax position rather than rushed before a phase-down step.
The Acquisition Date Rule
The date that governs is the acquisition date, not the placed-in-service date alone. Property acquired under a binding written contract entered into on or before January 19, 2025 generally remains under the old phase-down percentages even if it is placed in service in 2026.
For an owner who signed a purchase contract in late 2024 and closed in 2025 or 2026, this distinction is worth a large fraction of the benefit. It is the first thing to establish on any study covering a property that changed hands near that date, and it turns on contract documents rather than on the closing statement.
Properties Acquired Before the Cutoff
Older properties are not excluded from cost segregation. They are subject to the bonus percentage in effect when they were acquired, and the portion not eligible for bonus is still depreciated over its now-correct shorter recovery period rather than over 39 years.
A study on a 2019 acquisition still produces a substantial catch-up through Form 3115, because the difference between what was claimed and what should have been claimed accumulates across every year since. The benefit is real, it is just composed differently.
What Still Constrains the Deduction
Permanent 100 percent bonus does not solve usability. The passive activity rules under Section 469 are unchanged, so a large first-year deduction on a passive rental is still suspended unless the owner qualifies as a real estate professional, materially participates in a short-term rental, or the property is used in their own trade or business.
The excess business loss limitation also continues to apply, capping how much net business loss can offset non-business income in a year, with the remainder carried forward. On very large studies this can spread the benefit across several years even where the passive question is resolved.
Key Takeaways
- The OBBBA made 100 percent bonus depreciation permanent for property acquired after January 19, 2025.
- The acquisition date governs, not the closing date; a pre-cutoff binding contract keeps the old rates.
- Full-strength first-year benefit makes studies on smaller properties clear their cost more easily.
- Older properties still benefit through a Form 3115 catch-up of accumulated missed depreciation.
- Passive activity and excess business loss limits are unchanged and still govern usability.
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Frequently Asked Questions
Is bonus depreciation still 100% in 2026?
Yes, for qualifying property acquired after January 19, 2025. The OBBBA ended the phase-down schedule and made the 100 percent rate permanent, so there is no scheduled expiration to plan around.
What if I signed the purchase contract before January 19, 2025?
Property acquired under a binding written contract entered into on or before that date generally remains under the old phase-down percentages even if placed in service later. This is determined from the contract documents, and on a large study the difference is significant.
Does permanent bonus depreciation mean there is no rush?
There is no statutory deadline, but there is still a timing question. The deduction is worth most in a year with high income to offset, and a Form 3115 catch-up on an older property grows with each year it is deferred only in the sense that the accumulated difference sits unclaimed. Scheduling should follow the owner's tax position.
Can bonus depreciation create a loss I can use against other income?
Sometimes, subject to two limits. The passive activity rules generally prevent rental losses from offsetting business or wage income unless an exception applies, and the excess business loss limitation caps how much net business loss can offset non-business income in a single year.
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