Cost Segregation and Bonus Depreciation Under OBBBA: What Changed for 2026
The Phase-Down Reversed
For several years, cost segregation planning was dominated by a countdown. The Tax Cuts and Jobs Act had set bonus depreciation at 100 percent and then scheduled it to step down: 80 percent in 2023, 60 percent in 2024, 40 percent in 2025, 20 percent in 2026, and zero thereafter. Every conversation about a study included some version of act now, because the rate was falling.
The One Big Beautiful Bill Act changed that. It restored 100 percent bonus depreciation and made it permanent rather than scheduling another expiration. For property acquired after January 19, 2025 and placed in service thereafter, qualifying assets are fully deductible in the first year rather than at a reduced percentage.
That removes the artificial deadline that drove a lot of prior-year decision making, and it changes the shape of the planning conversation from when to whether.
Why This Makes Cost Segregation More Valuable, Not Less
It is tempting to read a permanent benefit as a reason to delay. That reasoning does not hold up, for a simple reason: bonus depreciation does nothing for real property on its own.
Bonus depreciation applies to property with a recovery period of 20 years or less. A residential rental building is 27.5-year property. A commercial building is 39-year property. Neither qualifies. Without a cost segregation study, there is no short-lived property on your depreciation schedule for bonus depreciation to apply to, and the rate being 100 percent instead of 40 percent makes no difference at all.
The study is what creates the 5-year, 7-year, and 15-year classifications that bonus depreciation attaches to. At a 40 percent rate, a study that reclassified $1,000,000 produced $400,000 of first-year bonus. At 100 percent, the same study produces $1,000,000. The permanent restoration makes every study meaningfully more valuable than it was under the phase-down, which is the opposite of a reason to wait.
The Acquisition Date Test Matters
The relevant date is generally when the property was acquired, not simply when it was placed in service. Property acquired after January 19, 2025 falls under the restored 100 percent rate. Property acquired before that date remains subject to the phase-down percentage that applied under prior law, even if it was placed in service later.
For most buyers this is straightforward. For anyone who had a binding written contract in place before that date, or who was mid-construction across the transition, the analysis requires care. A study should document the acquisition date and the rate applied rather than assuming 100 percent across the board.
This also matters for look-back studies. If you are running a study on a property placed in service in 2023, the bonus rate that applied in 2023 governs the catch-up computation. A look-back does not upgrade an old property to today's rate. It recovers what you were entitled to under the law that applied then, which is still substantial.
What Else Changed That Affects Real Estate Owners
OBBBA also raised the Section 179 expensing limit substantially, to $2.5 million with a phaseout threshold beginning at $4 million. Section 179 and bonus depreciation are different tools with different rules. Section 179 is limited to taxable income and cannot create a loss, while bonus depreciation can. Section 179 also applies to certain nonresidential improvements, including roofs, HVAC, fire protection, and security systems, that bonus depreciation does not reach. Our post on Section 179 versus cost segregation covers when each applies.
The legislation also created a new category of qualified production property, allowing full expensing of certain nonresidential real property used in domestic manufacturing, subject to specific construction start and placed-in-service windows. For manufacturers building new capacity, that is a significant and separate opportunity worth evaluating alongside a conventional study.
State conformity remains a separate question entirely. Many states decouple from federal bonus depreciation and require an addback, which means your federal and state depreciation schedules diverge. Our post on state bonus depreciation conformity covers which states follow federal treatment.
What Actually Drives Timing Now
With the rate stable, the timing argument shifts to the time value of money and to your own tax position. A deduction taken in 2026 is worth more than the same deduction taken in 2029, because you have the cash in the interim. That argument is durable and does not depend on a legislative deadline.
The more important timing question is whether you have income to absorb the deduction. A large passive loss with no passive income to offset simply suspends and carries forward. In that case the study still has value, but the benefit is deferred until you have income or dispose of the property. Owners who expect a large income year, a property sale, or a change in participation status should sequence the study accordingly rather than defaulting to the earliest possible year.
AE Tax Advisors works through this sequencing with real estate owners in their bonus depreciation and real estate investor tax planning resources.
Getting a Study Scoped for 2026
Stratum performs engineering-based cost segregation studies that document the acquisition date, the applicable bonus rate, and the classification support for every reclassified component. That documentation is what makes the position defensible if it is ever examined.
Request a free estimate or book a call to discuss your property and the year that makes the most sense to place the deduction.