How the 2025 Bonus Depreciation Rules Affect Real Estate Investors

✅ What’s new under OBBBA

• The OBBBA permanently restores 100% bonus depreciation for most qualified property that is acquired and placed in service after January 19, 2025. (RSM US)

• For property acquired (via a binding contract) on or before January 19, 2025 (even if placed in service later), the full 100% does not apply — instead those assets remain subject to the earlier phase-down rules (for example, 40% bonus depreciation for 2025) unless the taxpayer elects otherwise. (Moss Adams)

• The OBBBA also permits taxpayers, for the first tax year ending after January 19, 2025, to elect to take a reduced bonus depreciation rate (for example 40% instead of 100%) for some property classes. (BDO)

🏗 How this applies in practice for real estate investors

• If you purchase “qualified property” (for example equipment, furniture, furnishings, or other tangible property with a recovery period of 20 years or less) and you acquire it (i.e., the binding contract date) after Jan 19, 2025 and then place it into service, you qualify for 100% bonus depreciation under the new law.

• If you entered into a binding contract before Jan 20, 2025, your property will likely be eligible only for the reduced 40% rate if placed in service in 2025 (or other applicable reduced rate) despite being placed in service after Jan 19.

• For property that may have long lead times (e.g., construction, self-built components, real estate improvements), timing matters: when the “acquisition” or “construction begin” date occurs can determine whether the 100% bonus applies or whether you’re stuck with the reduced rate. (Moss Adams)

• Real estate investors in the Green Bay / De Pere region should be aware that if you’re renovating a rental property, upgrading equipment, or performing major improvements, the timing and contract date of acquisitions may determine whether you get full or partial bonus depreciation.

• From a tax preparation standpoint, the difference between 100% vs 40% can be significant in year-one deductions, meaning you should plan ahead and document acquisition and placed-in-service dates carefully.

📝 Key things to watch

• Binding contract date vs placed-in-service date: The contract date can lock in the acquisition date, meaning even if you place the asset into service after Jan 19, 2025, if the contract was signed earlier you may not get 100%. (Thomson Reuters)

• Electing the reduced rate: Even if eligible for 100%, you may choose to elect 40% (or other allowed option) because of income timing, NOLs, or other tax strategy reasons. (BDO)

• Holding period and property class: While the 100% restoration covers most assets with class life 20 years or less, some property types (like certain long-production-period property or aircraft) may have specialized rules. (InsightPlus)

• Cost segregation relevance: For real estate investors, stepping out components via cost segregation into shorter lives (5, 7, 15 years) remains important, because full buildings (39-year residential, 39-year commercial) generally do not qualify for bonus depreciation.

• Local focus: If you’re working with property in Green Bay or De Pere, ensure your tax preparation strategy aligns with these federal changes and your local state implications (Wisconsin) where applicable.

🔎 Bottom line

For your clients or your own real estate investments, the OBBBA means that acquisitions entered into after January 19, 2025 hold the potential for full 100% bonus depreciation — a significant incentive for capital investment. But if the contract or acquisition is prior to that cutoff, you may only get the reduced 40% (in 2025) unless you elect differently. Document everything, coordinate timing, and as always with tax preparation, plan ahead so you maximize the benefit.

If you’re in the Green Bay or De Pere area and want help evaluating how these changes affect your properties and your year-end tax preparation, I’m happy to review your situation.