100% Bonus Depreciation Restored Under the OBBB: What it means for Real Estate Investors

Real estate investors just got a major tax win.

The new Opportunity for Business and Building Bill (OBBB) restores bonus depreciation to 100 percent — up from the current 60 percent — and increases the Section 179 deduction limit to $2.5 million.

If you’re planning property improvements or equipment purchases in 2025, this could dramatically increase your first-year tax deductions and free up cash for reinvestment.

What Is Bonus Depreciation?

Bonus depreciation is a tax rule that allows you to accelerate deductions on certain capital expenditures. Instead of spreading deductions over several years, you can expense the entire cost in the year the property is placed in service.

For real estate owners, this means eligible improvements, building systems, and equipment for nonresidential real property such as roofs, HVAC systems, and interior upgrades can now be fully deducted in the first year — no more partial write-offs stretched over decades.

Why 100% Bonus Depreciation Matters

Previously, bonus depreciation was set at 60 percent, and it was scheduled to phase down further in the coming years.

OBBB changes that to 100% immediate deduction for qualifying improvements placed in service after the bill’s effective date. The bill makes this permanent, so there are no phase-out deadlines to rush against.

This means larger tax savings and improved cash flow for many investors and business owners.

For example, a $1 million qualifying property improvement would have generated a $600,000 deduction under 60 percent bonus depreciation. Now, you can deduct the full $1 million in year one — potentially saving $370,000 in taxes at a 37 percent rate.

Section 179 Deduction Also Increases

OBBB also boosts the Section 179 deduction limit to $2.5 million.

Section 179 allows businesses to immediately expense the full cost of qualifying property, including certain improvements to nonresidential real estate.

This can be especially helpful for installing tenant improvements such as fire protection, security systems, HVAC improvements, energy efficient installations, roofing upgrades, and more.

Combined with 100% bonus depreciation, Section 179 now gives you even more flexibility to maximize deductions.

Who Should Pay Attention?

These changes are especially valuable for:

• Real estate investors with multiple properties
• Commercial landlords planning renovations
• Developers improving tenant spaces
• Businesses purchasing major equipment

Bottom Line

The return of 100% bonus depreciation — especially paired with a higher Section 179 limit — is one of the most significant tax opportunities for real estate investors in years.

If you’re planning improvements, acquisitions, or equipment purchases, now’s the time to revisit your tax strategy. Contact our office if you have any questions about how this change affects your real estate assets.

This article is for informational purposes only and does not constitute legal or tax advice. Consult your tax advisor to evaluate how these changes apply to your specific situation.