Bonus Depreciation in 2026: What Property Investors Need to Know Now

The bonus depreciation landscape has changed significantly. With 100% bonus depreciation restored for property acquired after January 19, 2025, investors placing new properties in service now have access to the full first-year deduction on qualifying components. But the rules differ depending on when you acquired your property.

The Current Bonus Depreciation Rates

The applicable bonus rate depends on when the property was acquired or placed in service. Here is how the schedule breaks down:

The restoration of 100% bonus applies to qualifying property acquired and placed in service after January 19, 2025. The original TCJA phase-down schedule still applies to property acquired before that date.

Why Cost Segregation Still Matters at Reduced Rates

Even for property subject to the phase-down rates (40% or 20%), a cost segregation study delivers meaningful acceleration. This is because bonus depreciation is only one part of the benefit. The other part is the MACRS reclassification itself.

When a study reclassifies components from the 27.5-year residential schedule into 5-year, 7-year, or 15-year property, those components follow their shorter MACRS schedules regardless of the bonus rate. A 5-year asset depreciated under MACRS with no bonus at all still returns roughly 20% of its cost in year one and the balance over the remaining four years — far faster than the 3.6% annual rate under the standard 27.5-year schedule.

Bonus depreciation accelerates the acceleration. But the underlying MACRS reclassification provides permanent value at any bonus rate, including zero.

What This Means for STR Investors

Short-term rental investors who acquire property after January 19, 2025 and meet the material participation requirements can apply the full 100% bonus depreciation from a cost segregation study against their W-2 and business income. This is the most favorable combination available under current law: full bonus, non-passive treatment, and ordinary income offset.

What This Means for Long-Term Rental Owners

Long-term rental owners acquiring property after January 19, 2025 receive the same 100% bonus depreciation on reclassified components. The accelerated deductions offset rental income and can create passive losses that carry forward or offset gains from other passive activities. Investors who qualify as Real Estate Professionals can apply those losses against ordinary income as well.

Regardless of rental type, the restored 100% rate makes 2025 and 2026 acquisitions particularly favorable for cost segregation. Use the free calculator to estimate the benefit for your property, and review the full details in our savings breakdown.