The Truth About 100% Bonus Depreciation

07/24/2025

There's a lot of hype around "writing everything off" using 100% bonus depreciation. Some of it's technically true—but most of it is misleading, especially from social media tax influencers, and misunderstood by business owners.

Now that the One Big Beautiful Bill (OBBB) has been signed into law, restoring 100% bonus depreciation permanently for qualified property placed in service on or after January 20, 2025, it's more important than ever to get the facts straight.

What 100% Bonus Depreciation Actually Is

100% bonus depreciation lets businesses deduct the full cost of qualified property in the year it's placed in service.

It's not a rebate. It's not a credit.
It's just a timing difference—a way to frontload your depreciation deduction instead of spreading it out over years.

What Qualifies

Tangible property used in business with a recovery period of 20 years or less
(equipment, furniture, vehicles > 50% business use)
Used property (new to you)
Certain land improvements (paving, fencing, landscaping)
Certain building components (if broken out via cost seg)

What Doesn't

Land
Entire buildings
Personal-use property
Anything placed in service before Jan 20, 2025 that followed the old phase-down rules

Cost Segregation Still Matters

Real estate investors can benefit significantly from bonus depreciation—if they do a cost segregation study to break out shorter-life components of the building (e.g. flooring, cabinets, wiring).

That's where the big upfront 100% deductions come from—but only if:

The property is placed in service after Jan 19, 2025
You have the right type of income to use the loss on (passive vs. non-passive)

But Beware the Hype

Firms selling tax strategies like cost segregation studies often market them as if they're investment products. One letter a client of ours received promised a "20x to 132x owner return on investment."

That's not how this works.

There is no ROI in the traditional sense. You're not creating value—you're just accelerating a deduction you were already entitled to over time.

The real benefit is time value of money—you get to keep more cash now, defer your tax bill, and potentially use that money for operations or investments. That's useful, but it's not magic—and it's not 132x anything.

In fact, accelerating depreciation is effectively taking on tax debt. You're pulling a deduction forward—borrowing from future years—and that means higher taxable income later when those deductions are gone. If you use the cash wisely, great. If not, that tax bill will show up when you least want it.

If someone's pitching you a deduction like it's a guaranteed investment return, walk away.

STR Loophole Still Applies

Short-term rentals (average stay of 7 days or less) can still be treated as non-passive if you materially participate (i.e. you actually run the thing).

That means your bonus depreciation loss can offset W-2 or business income.

But only if:

You're involved more than anyone else
You don't outsource everything
You document it

Common Misunderstandings

❌ "100% bonus means you can write off 100% of the purchase price of a short-term rental."
No. Only certain components of the building can be accelerated—usually 15–30% of the total cost, depending on the property and the cost seg study.

❌ "Do a cost seg and wipe out all your taxes."
Only works if you have the right income type and enough of it to use the deduction.

❌ "Buy a G-Wagon and write it off."
Only if it's >6,000 lbs and primarily used for business. Not a free vehicle.

Bottom Line

100% bonus depreciation is back and stronger than ever—if you know what you're doing.

TikTok makes it sound simple.
Real tax planning requires real strategy.

Final Note

All the advanced tax strategies in the world don't mean a thing if the basics aren't in place.

You need clean, accurate books that tell the truth. You need systems that help you run a profitable business—not just chase deductions. That's what we focus on.

If you're serious about building a business that works—and using tax strategies that make sense when the time is right—reach out to us. We'll help you get the foundation right first.