What Is Bonus Depreciation?

Bonus depreciation lets you deduct the cost of qualifying property in the year you put it into service, instead of spreading it across its useful life.

It's an acceleration, not an extra deduction. You're claiming the same total, sooner — which is worth having, because a deduction today is worth more than the same deduction spread over the next fifteen years.

The current rate is 100%, and it's permanent rather than phasing down as it was previously scheduled to.

What qualifies, and what doesn't

This is where landlords are most often disappointed.

Your building doesn't qualify. Residential rental property is depreciated over 27.5 years, and that long life puts it outside the rules.

The shorter-lived things do — appliances, flooring, certain fixtures, and land improvements like fencing, paving and landscaping.

So for a landlord who buys a house and changes nothing, bonus depreciation does very little on its own. Reaching the qualifying components generally means a cost segregation study to separate them out.

The date that decides it

There's an acquisition test. Property acquired after 19 January 2025 gets the full rate; anything committed to earlier stays on an older, lower schedule — and the relevant date is the binding contract, not the closing.

There's also an election to take a reduced rate instead of the full amount in the first year, which sounds perverse but occasionally makes sense.

The catch

What you accelerate now comes back when you sell, as recapture — and the accelerated slice comes back at your ordinary income rate rather than the capped rate that applies to the building. For many owners this is a timing benefit rather than a saving.

Where to read more

The date test and whether it applies to your property are covered in does the new bonus depreciation apply to your rental.