If you own a rental property acquired after January 19, 2025, this is one of the best planning environments for cost segregation in years. 100% bonus depreciation is back — and it's now permanent.
For properties acquired earlier, the planning picture is different. Understanding which rules apply to your property is the first step, and it directly determines how valuable a cost segregation study will be for you in 2026.
What changed: the OBBBA restored 100% bonus depreciation
The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, permanently restored 100% bonus depreciation for qualifying property. The prior TCJA phase-down schedule — which had reduced bonus to 60% in 2024 and was heading toward zero — no longer applies to newly acquired property.
The key threshold is the acquisition date:
- Acquired after January 19, 2025: 100% bonus depreciation applies to eligible components (permanent, no sunset)
- Acquired under a binding contract before January 20, 2025: TCJA phase-down schedule applies based on placed-in-service year
TCJA phase-down schedule (pre-January 20, 2025 acquisitions)
For properties where the binding contract predates January 20, 2025, bonus depreciation is governed by the TCJA schedule:
| Placed-in-service year | Bonus depreciation rate |
|---|---|
| 2022 | 100% |
| 2023 | 80% |
| 2024 | 60% |
| 2025 | 40% |
| 2026 | 20% |
| 2027+ | 0% |
Which rate applies to your rental depends on your binding contract date. Your closing documents will confirm it — or your tax preparer can. IRS Notice 2026-11 provides interim guidance on the OBBBA transition.
Why acquisition date matters more than placed-in-service date
Under the OBBBA, the controlling date is when the property was acquired (based on the binding contract date), not when it was placed in service. A property under contract before January 20, 2025 remains on the TCJA schedule even if it was placed in service in 2025 or later.
Eligible short-life components for bonus depreciation include:
- 5-year property (appliances, carpet, fixtures)
- 7-year property (certain specialty items)
- 15-year land improvements (driveways, landscaping, fencing)
The 27.5-year structural building component does not qualify for bonus depreciation regardless of acquisition date.
Real-world impact
For a property acquired after January 19, 2025 with $400,000 in total purchase price:
- Estimated reclassifiable basis: ~$48,000 (5-year + 15-year components)
- Year 1 depreciation from short-life components at 100% bonus: $48,000 fully deducted
- vs. the same components spread over 5 and 15 years without bonus: ~$5,500 in Year 1
The difference is substantial. At a 32% marginal tax rate, that's roughly $13,600 of additional Year 1 tax savings, just from the bonus depreciation acceleration alone. For rental owners with taxable income to offset, the timing matters enormously.
Why this matters for residential rental owners
For years, cost segregation was mostly a commercial real estate strategy. Traditional engineering firms charged $5,000 to $15,000+ per study, which didn't pencil out on a $300,000 single-family rental. Residential owners were effectively locked out of a strategy that could have saved them tens of thousands in taxes.
That's changed. Residential-focused workflows can now deliver IRS-compliant engineering-based studies in 2 business days at a flat fee that works on single-family rentals, duplexes, fourplexes, short-term rentals, and manufactured housing. Combine that with 100% bonus depreciation being back, and the cost-benefit math has shifted dramatically in favor of residential owners.
Your planning checklist for 2026
- Confirm your acquisition date. Pull your closing documents. If the binding contract date is after January 19, 2025, you're in the 100% bonus regime.
- Don't wait if you're buying in 2026. Every month of delay between purchase and study is a month of potential deduction sitting idle.
- If you bought pre-January 20, 2025 and haven't done a study: you can still do a look-back study. Your CPA or tax software uses the report we provide to file Form 3115 and claim missed depreciation. See our look-back study guide.
- Verify state treatment with your CPA. Not every state conforms to federal bonus depreciation, so your federal and state numbers may differ.
- Think about the STR loophole. If you own a furnished short-term rental and materially participate in it, the stack of 100% bonus + cost segregation + non-passive treatment is uniquely powerful. See our guide to STR cost segregation.
Use the free cost segregation calculator to see what 100% bonus depreciation looks like on your specific property. When you're ready, start your study and have a complete IRS-compliant report in 2 business days.