By Daryl L. Staley, CPA, MBA, Member of the Firm 

In a landmark move for the real estate industry, the One Big Beautiful Bill, signed into law in July 2025, has permanently reinstated 100% bonus depreciation - a powerful tax incentive that’s reshaping investment strategies across the country.

What is 100% bonus depreciation?

At its core, bonus depreciation allows investors to immediately deduct 100% of the cost of qualifying property - typically assets with a useful life of 20 years or less - in the year they are placed in service.

This includes flooring and cabinetry, HVAC systems, lighting and electrical upgrades, and site improvements like landscaping and fencing. These assets are often identified through a cost segregation study, which breaks down a property into its component parts for accelerated depreciation. 

Why it matters for real estate professionals

For real estate professionals, especially those who qualify as real estate professionals under IRS rules, this provision is more than a tax break - it’s a strategic lever. By front-loading depreciation, investors can offset active income from commissions, consulting, or other real estate activities, reduce taxable income significantly in the first year, and reinvest tax savings into new properties or renovations. This creates a snowball effect - more cash flow, more acquisitions, and faster portfolio growth.

A boon for short-term rental investors

Short-term rental (STR) owners - think Airbnb or VRBO - stand to benefit enormously. Unlike traditional rentals, STRs can qualify for bonus depreciation even if the owner doesn’t meet the real estate professional status, provided that the property is rented on a short-term basis (average stay under 7 days) or the owner materially participates in the business (e.g., managing bookings, cleaning, guest communication). This opens the door for W-2 earners and side-hustlers to tap into massive tax savings, often turning a profitable STR into a tax-free cash cow. 

Strategic implications

The permanent nature of this provision means investors can now plan acquisitions with precision, knowing the tax benefits are locked in, time renovations to maximize first-year deductions, and structure deals to optimize depreciation allocations among partners. It’s not just about saving money - it’s about engineering wealth.

Final thoughts

100% bonus depreciation is no longer a fleeting opportunity - it’s a cornerstone of modern real estate strategy. Whether you’re a seasoned developer, a short-term rental host, or a tax-savvy investor, this tool can dramatically accelerate your path to financial freedom. Want help modeling how this could impact your portfolio or planning your next acquisition? Contact us at the form below or visit our related service page for more information on our real estate consulting services.

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