Cost Segregation  /  Bonus Depreciation
Cost Segregation

100% bonus depreciation,
multiplied by cost segregation.

Bonus depreciation lets you fully deduct short-life property in its first year. Cost segregation is what creates that short-life property. Together, they can turn a large share of a building’s cost into an immediate first-year deduction.

Estimate Your First-Year Deduction
The Rule

Back to 100%, and permanent.

Bonus depreciation had been phasing down, 80% in 2023, 60% in 2024, 40% in early 2025. The 2025 law reversed that: it restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025, and made it permanent. For the first time since 2017, a full year’s worth of short-life property can be deducted immediately, with no scheduled sunset hanging over the decision.

Why They Work Together

Cost seg creates it. Bonus deducts it.

Bonus depreciation applies to property with a recovery period of 20 years or less. On its own, a building is 39- or 27.5-year property, and none of it qualifies. A cost segregation study is what carves out the 5-, 7-, and 15-year components inside that building, and every one of those buckets is bonus-eligible. Reclassify 30% of a building, and with 100% bonus, that entire 30% can be deducted in year one instead of over decades.

Illustrative

What the combination can look like.

Illustrative example — not a quote

An investor places a $5,000,000 building in service. A study reclassifies about 30% of the depreciable basis into 5-, 7-, and 15-year property:

~$1,500,000

Eligible for 100% bonus depreciation, deducted in the first year, rather than spread across 39 years. The remaining basis continues on its normal schedule.

Figures are illustrative only. Actual results depend on the property and are determined through the study.
Worth Knowing

A few details that matter.

Qualified improvement property. Interior improvements to nonresidential buildings (QIP) are 15-year property and bonus-eligible, a common source of accelerated deductions on renovations and tenant build-outs.
Recapture on sale. Deductions taken now can be recaptured at sale, so bonus is most powerful for owners who will hold, or who plan to defer gain through a 1031 exchange.
Passive loss limits. Large first-year deductions can create losses that are limited unless you have passive income or real estate professional status. We flag this before you file.
Common Questions

Bonus depreciation, plainly.

Does bonus depreciation apply to a building I buy used?

Yes. Unlike the old rules, bonus applies to used property too, as long as it’s new to you. That’s why cost segregation on an acquired building is so powerful.

What if my property was placed in service before January 20, 2025?

It follows the bonus rate in effect for its placed-in-service year (for example, 60% for 2024). A look-back study still captures it at that rate, plus the accelerated MACRS depreciation.

Do I have to take bonus depreciation?

No, it can be elected out of, by class of property, if a large first-year deduction isn’t useful to you. We model it either way with your CPA.

See what a first-year deduction could look like.

Estimate Your First-Year Deduction

This page is general information, not tax or legal advice. Depreciation results depend on the property, the taxpayer’s facts, and applicable law, and are determined through the cost segregation study in coordination with your tax advisor. Novaric does not guarantee deduction amounts or any tax outcome.