Tax Field Guide
Register

← Strategy library

Real Estate & Land

Accelerated Depreciation

Overview

Cost segregation and bonus depreciation speed up deductions on property, which can lower taxable income in early years.

IRS scrutiny

Accepted when documented carefully, and the IRS reviews it more often.

Rules, risks and sources

Key rules

OBBBA §70301 restored a permanent 100% bonus for qualified property acquired after Jan. 19, 2025 (Notice 2026-11 interim guidance; binding-contract acquisition rules). Property acquired earlier follows the TCJA phase-down. Passive-activity, at-risk and excess-business-loss limits still apply. Separately, taxpayers may elect a 100% first-year deduction for qualified production property (generally nonresidential real property used as an integral part of manufacturing, chemical production, agricultural production or refining) placed in service after July 4, 2025 and before Jan. 1, 2031 (§168(n); Notice 2026-16 interim guidance, with recapture if the property stops qualifying). Section 179 expensing for tax years beginning in 2026: up to $2,560,000, reduced dollar-for-dollar once §179 property placed in service exceeds $4,090,000; the §179 amount for a heavy sport utility vehicle is capped at $32,000 (Rev. Proc. 2025-32).

Key risks

Depreciation recapture on sale; passive limits for rental owners who are not real-estate professionals. Vehicles and other listed property: §179 and bonus depreciation require more than 50% qualified business use, and the benefit is recaptured if business use later falls to 50% or less (§280F(b), (d)(1); §179(d)(10)). Weak cost segregation studies: the IRS Cost Segregation Audit Techniques Guide says examiners should 'view with caution' studies based on a 'rule of thumb' and lists site visits and reconciliation to actual costs among the elements of a quality study (Pub. 5653).

Primary sources

Facts checked 2026-10-20.

Common questions

Is 100% bonus depreciation back?

Yes, for qualified property acquired after January 19, 2025. Property acquired earlier follows the older phase-down. The passive activity rules still limit who can use the resulting losses.

Sources: IRS Notice 2026-11; 26 U.S.C. §469

Can I write off a heavy SUV under Section 179?

Only in part, and only for real business use. For tax years beginning in 2026, the Section 179 amount for a sport utility vehicle is capped at $32,000. Vehicles are listed property, so Section 179 and bonus depreciation require more than 50% business use, and the benefit is recaptured if business use later drops to 50% or less.

Sources: Rev. Proc. 2025-32, section 3.24; 26 U.S.C. §280F

What makes a cost segregation study hold up?

The IRS audit guide lists 13 elements of a quality study. They include preparation by someone with expertise, a detailed description of the methodology, and reconciliation of allocated costs to actual costs. The guide says a quality study includes a site visit, and tells examiners to view 'rule of thumb' studies with caution.

Source: IRS Publication 5653, Cost Segregation Audit Techniques Guide

Sponsors that offer this strategy

Advisors who offer this strategy

Education only; not tax, legal or investment advice. Listing here is not a recommendation.