Why 2025 Is the Best Year Yet for Cost Segregation: Leverage the OBBB's 100% Bonus Depreciation

If you're a high-income earner or business owner with significant tax exposure, 2025 might be your most strategic year yet to invest in commercial property and perform a cost segregation study. Thanks to the One Big Beautiful Bill Act (OBBB), bonus depreciation is restored to 100%—but only for assets acquired and placed in service on or after January 20, 2025. Here's how Certified General Appraisers like those at Baldwin Appraisals can help you capitalize on this limited-time opportunity.

What Is Cost Segregation?

Cost segregation is a method of accelerating depreciation deductions by reclassifying components of a commercial property into shorter-lived asset classes. Instead of depreciating everything over 39 years (or 27.5 for residential), a cost seg study breaks the property into parts—like equipment, site improvements, and specialty systems—that can be written off in 5, 7, or 15 years.

This strategy front-loads your tax deductions, improving cash flow and ROI.

Bonus Depreciation: The 2025 Window

The One Big Beautiful Bill Act (OBBB), enacted in January 2025, reinstated 100% bonus depreciation for qualifying property acquired and placed in service on or after January 20, 2025, through December 31, 2026. That means:

• You can write off 100% of the value of short-life property (5-, 7-, and 15-year assets) in the year it’s placed in service

• Applies to both new and used property, as long as it is new to you (i.e., you haven't previously owned or used it) and used in a trade or business

• This includes acquisitions of existing multifamily and commercial buildings, provided they are placed into service as income-generating property

• The placed-in-service deadline is December 31, 2026—so timing is critical

Important for Real Estate Investors: Even if you’re buying an existing multifamily or commercial property, you may still qualify for 100% bonus depreciation on the reclassified 5-, 7-, and 15-year components through a cost segregation study—such as appliances, flooring, signage, parking lots, fencing, and landscape improvements. The building structure (27.5 or 39 years) is not eligible for bonus depreciation but is still depreciated via MACRS.

Important: If the property was acquired or placed in service before January 20, 2025, the bonus depreciation is limited:

• 2023: 80%

• 2024: 60%

• Jan 1–19, 2025: 40%

After January 20, 2025: 100% (under current law)

What Happens After 2026?

Although OBBB reinstated 100% bonus depreciation, the provision only applies to property acquired and placed in service by December 31, 2026. Under current law, bonus depreciation is scheduled to expire starting January 1, 2027, unless Congress enacts new legislation.

To extend bonus depreciation beyond 2026, a new law must be passed by Congress and signed by the President to either make the provision permanent or extend it further. Without such action, assets placed in service in 2027 or later would not qualify for bonus depreciation and would instead follow standard MACRS schedules.

Case Study: Dr. Lee’s Tax Shelter Strategy

In 2025, high-earning orthopedic surgeon Dr. Sarah Lee used cost segregation and bonus depreciation to slash her federal tax liability:

• Purchase: $1.9M car wash business (LLC, June 2025)

• Material Participation: Achieved (spouse co-manages)

• Depreciation Breakdown:

  • Equipment: $400,000 (5-7 year, 100% deductible)

  • Site Improvements: $250,000 (15 year, 100% deductible)

  • Signage/POS: $150,000 (5-7 year, 100% deductible)

• Tax Result: $825,000 total deductions

• Tax Savings: Approx. $305,000 (at 37%)

This was possible because Dr. Lee acquired and placed the car wash in service after January 20, 2025—meaning it was operational, permitted, and customer-ready before year-end.

MACRS + Bonus Depreciation: How It Works

The Modified Accelerated Cost Recovery System (MACRS) allows certain property to be depreciated more quickly. With bonus depreciation, the entire amount of qualifying short-life property (5-, 7-, and 15-year) can be deducted immediately in the first year. This reduces taxable income and improves investment performance.

Asset Type	MACRS Class Life	Bonus Eligible	Example Assets
Personal Property	5-7 years	Yes	Equipment, vacuums, signage
Land Improvements	15 years	Yes	Asphalt, drainage, lighting
Roof (shingle, structural)	27.5 (residential) / 39 (commercial)	No	Full roof systems
Structural Components	27.5 or 39 years	No	Walls, HVAC (entire building)

Note: Roofs, including shingle roofs, are treated as structural components for tax purposes. They are depreciated over 27.5 years for residential rentals and 39 years for commercial buildings—even if their physical lifespan is shorter. Minor repairs may be expensed, but full roof replacements or structural upgrades must be capitalized and depreciated.

Why Certified General Appraisers Can Lead Cost Seg Studies

No special license is required to perform a cost segregation study. However, the IRS requires defensible, quality work that aligns with engineering-based methodologies. A Certified General Appraiser is highly qualified:

• Trained in building systems and construction cost analysis

• Skilled at narrative reporting and defensible valuation

• Equipped to identify and allocate assets into proper MACRS categories

Appraisers like those at Baldwin Appraisals combine valuation expertise with a detailed understanding of depreciation rules, making them ideal professionals to deliver compliant, high-quality cost seg studies.

Don’t Miss the 2025–2026 Window

Bonus depreciation is restored to 100% only for property acquired and placed in service on or after January 20, 2025, through the end of 2026. If you're acquiring or improving commercial property, the timing of when it’s placed in service is crucial. A delay beyond December 31, 2026—or an acquisition date before January 20—could reduce or eliminate your bonus eligibility.

Unless Congress passes another law extending the provision, bonus depreciation will no longer apply to property placed in service in 2027 or later. That makes the current window one of the most advantageous periods for front-loaded tax savings.

Conclusion: A Rare Wealth Strategy with a Shelf Life

The OBBB has revived one of the most powerful tax planning tools in modern real estate investing. Cost segregation studies—especially when performed by experienced Certified General Appraisers—unlock front-loaded tax deductions that can dramatically reduce tax liability while accelerating long-term wealth.

Take action now. Contact Baldwin Appraisals to schedule a cost segregation study and maximize your 2025 tax savings.