Bonus depreciation is a tax rule that lets a business deduct a large share, currently 100%, of the cost of qualifying property in the first year instead of spreading it out over many years. It applies to new and used property with a tax life of 20 years or less, like equipment, furniture, and parking lots.
This content is not tax or financial advice for you. Please talk with a CPA to find what's right for your situation.
The idea in plain English
Normally, when a business buys something that lasts several years, it deducts the cost a little at a time. That's regular depreciation.
Bonus depreciation is a shortcut. It lets you take a big "bonus" deduction in year one. Right now, that bonus is 100% for property acquired after January 19, 2025, so you can often deduct the whole cost immediately.
A simple example
A landlord buys new appliances and furniture for a rental in 2026 for $20,000.
- Without bonus depreciation: These are 5-year property. The deduction is spread over about six tax years, starting with $4,000 in year one.
- With 100% bonus depreciation: The full $20,000 is deducted in 2026.
Same total deduction. It just comes all at once.
What qualifies?
- Equipment, machinery, and computers
- Furniture, appliances, and carpet
- Land improvements like parking lots, fences, and landscaping (15-year property)
- Interior improvements to commercial buildings (qualified improvement property)
- Off-the-shelf software
- Used property, as long as you didn't use it before and didn't buy it from a related party
What doesn't qualify?
- Land
- Residential rental buildings (27.5-year property)
- Commercial buildings (39-year property)
That's why real estate investors pair bonus depreciation with cost segregation. The study finds the parts of a building that do qualify.
Is bonus depreciation the same as Section 179?
No, but they're cousins. Both let you deduct costs upfront.
- Bonus depreciation has no dollar limit and can create a tax loss.
- Section 179 has an annual dollar limit and can't create a loss. It's limited to your business income.
Is bonus depreciation always a good idea?
Not always. You might skip it if:
- You can't use the deduction this year because of passive loss rules
- You expect to be in a higher tax bracket later
- Your state doesn't follow federal bonus depreciation and tracking two schedules isn't worth it
You can elect out of bonus depreciation for any class of property.
Frequently asked questions
Is bonus depreciation permanent?
Do I have to claim bonus depreciation?
Does bonus depreciation get taxed back later?
See what your property may qualify for
Run our 2-minute STR Qualification Quiz or model your Low / Mid / High cost segregation range.
Related guides
Bonus Depreciation Rules for 2026: What Qualifies and How It Works
100% bonus depreciation is now permanent. Learn what qualifies in 2026, the January 19, 2025 cutoff, how it differs from Section 179, and how to use it.
Read guideBonus Depreciation 2025: The 40% vs. 100% Split Explained
In 2025, bonus depreciation is 40% or 100% depending on when you acquired the property. See the January 19 cutoff, examples, and what to do before you file.
Read guideAccelerated Depreciation Explained: Methods, Pros, and Cons
Accelerated depreciation lets you deduct more of an asset's cost early. Learn the main methods, how they compare to straight-line, and when it makes sense.
Read guideWhat Is Cost Segregation? A Plain-English Explanation
Cost segregation lets property owners deduct parts of a building faster. Here's what it means, how it works, and why investors use it, in plain English.
Read guideThis content is not tax or financial advice for you. Please talk with a CPA to find what's right for your situation.