If you’re an investor acquiring, renovating, or holding real estate for long-term rentals, there’s a major tax update you’ll want to know about. Congress has reinstated 100% bonus depreciation, giving investors the ability to fully deduct costs on qualified assets in the first year for those placed in service after January 19, 2025.
At Residential Capital Partners, we help residential fix-and-flip and rental investors move quickly on opportunities that make sense. This renewed tax incentive adds another lever to boost returns, improve cash flow, and reinvest faster. Here’s what you need to know.
What Is Bonus Depreciation?
Bonus depreciation is a provision in the tax code that lets investors immediately deduct the full cost of qualifying assets for the tax year they're placed in service, rather than spreading the deduction out over multiple years. The phase-out schedule that had bonus depreciation dropping from 100% to 80%, then 60%, and so on, has been removed. The 100% rate is now in effect for eligible property placed in service after January 19, 2025. For real estate investors, this means more working capital upfront and greater opportunity to scale faster (
sound familiar?)
While buildings themselves generally don’t qualify for bonus depreciation, many items inside or attached to a property do. Through a cost segregation study, you can separate shorter-lived assets (like five-, seven-, or fifteen-year property) from the longer-term building structure, making them eligible for the 100% deduction.
How It Benefits Real Estate Investors
This change has far-reaching benefits for both fix-and-flip and long-term rental investors:
- Bigger upfront deductions: You can deduct more in the first year, reducing taxable income, and improving early cash flow.
- Accelerated ROI: Freeing up capital through tax savings allows you to reinvest in your next project sooner.
- Improved deal timing: The key phrase is “placed in service.” That’s when the asset is ready and available for use, not necessarily when it’s purchased. Planning rehab timelines and improvements around that milestone could make a big difference.
Strategic Considerations Before You File
This opportunity is powerful, but it’s also technical. Here are some areas to review with your CPA or tax advisor before claiming bonus depreciation:
- Eligibility: Assets must have a recovery period of 20 years or less under the IRS’s depreciation system (MACRS).
- Cost Segregation Study for Rental Properties: A professional study can help you identify which components of your property qualify for accelerated depreciation.
- Timing: Ensure your qualifying assets are “placed in service” after January 19, 2025, to take advantage of the full 100%.
- State Variations: Not all states follow federal depreciation rules so it's important to check whether your state’s tax code conforms.
- Future Sale Implications: Remember that taking large deductions upfront can trigger depreciation recapture when you sell, which should be factored into your long-term tax strategy.
Aligning Tax Benefits With Your Financing Strategy
At ResCap, we work every day with investors using smart, strategic financing to scale their portfolios. Bonus depreciation fits right into this model.
When your fix-and-flip or rental acquisition is financed through our unique, no-money-down approach, you’re leveraging your capital efficiently. Pair that with a tax strategy that accelerates deductions, and you can compound your gains by reducing tax exposure, improving cash flow, and reinvesting faster in your next deal.
This isn't about accounting tricks or smoke and mirrors. It’s about making strategic use of legitimate tools to make your capital work harder for you.
The Bottom Line
For active real estate investors, the return of 100% bonus depreciation is one of the most meaningful tax advantages in recent years. Whether you’re purchasing a long-term rental or improving a property, this renewed policy rewards investors who plan strategically.
At Residential Capital Partners, our team is here to help you move quickly and invest wisely. Because when opportunity knocks, timing and smart strategy make all the difference.
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