**Disclaimer** I'm not a CPA

After a gradual phase-out, 100% bonus depreciation is making a timely comeback—and the implications for the real estate sector are substantial.

For those investing in commercial real estate, this tax incentive isn't just a line item, it's a strategic advantage. Under the revised tax code, qualifying assets with a useful life of 20 years or less (think improvements, equipment, and even certain components of buildings) can now be fully expensed in year one. The result? Investors can dramatically reduce their taxable income and improve cash flow in the early years of ownership.

Why this matters:
• Accelerated returns: Front-loaded depreciation means faster ROI and greater leverage for reinvestment.
• Stronger syndication appeal: Sponsors can offer enhanced tax benefits to LPs, making deals more attractive.
• Incentivized development: Developers can structure cost segregation studies to maximize depreciation, particularly on mixed-use and industrial assets.

As interest rates remain elevated, every dollar of retained capital counts. And in this environment, tax efficiency becomes a core part of investment strategy not just a bonus.

Whether you're a passive investor or an active sponsor, the return of 100% bonus depreciation is a moment to capitalize on.

Example:

An investor purchases a $1,000,000 multifamily property in 2025.
•Land value (non-depreciable): $200,000
•Building + eligible components: $800,000

The investor performs a cost segregation study, which identifies that 30% of the property (or $240,000) qualifies for bonus depreciation (items like appliances, flooring, fixtures, HVAC, parking lot, landscaping, etc.).

Without Bonus Depreciation:

Depreciation is spread over 27.5 years:
•$800,000 ÷ 27.5 = approx. $29,000 per year

With 100% Bonus Depreciation:
•The $240,000 in short-life assets can be fully depreciated in

Year 1
•Regular depreciation still applies to the remaining $560,000 building value
•$560,000 ÷ 27.5 = approx. $20,364 per year

Year 1 Depreciation Total:
•Bonus depreciation: $240,000
•Regular depreciation: $20,364
•Total = $260,364 deduction in

Impact:

If the investor has $300,000 in passive income, this depreciation deduction reduces their taxable income to $39,636 potentially saving $70,000+ in taxes (assuming a 30%–35% effective tax rate).

Let's connect if you'd like to explore how to structure your next acquisition with this advantage in mind.