The 30-second answer
Bonus depreciation lets you deduct the full cost of qualifying 5-, 7-, and 15-year property in the year it is placed in service. The catch: on a building, those short-life components are buried inside the 27.5- or 39-year basis until a cost segregation study pulls them out. The calculator above estimates your Year-1 deduction and tax savings once a study reclassifies that basis. 100% bonus depreciation is in effect under §168(k) for qualifying property placed in service after January 19, 2025.
How bonus depreciation and cost segregation work together
Bonus depreciation is the rule; cost segregation is what makes it usable on real estate. Here is the chain:
- Your building depreciates slowly by default. Residential rental over 27.5 years, commercial over 39 years, a few percent per year.
- A cost segregation study reclassifies 20% to 35% of the basis into 5-year (appliances, fixtures, flooring), 7-year, and 15-year (site improvements) property.
- Bonus depreciation deducts those reclassified components in full in Year 1. Under §168(k), qualifying property placed in service after January 19, 2025 gets 100% bonus.
- The result is a large front-loaded deduction. Every $100K reclassified is about $37K of Year-1 federal tax savings at the 37% bracket.
Use the calculator above to model your property. To go deeper on the mechanics, see the bonus depreciation hub and the full cost segregation calculator.
What qualifies for bonus depreciation
Bonus depreciation applies to MACRS property with a recovery period of 20 years or less, which is exactly the 5-, 7-, and 15-year property a cost segregation study identifies. The 27.5- or 39-year building structure itself does not qualify, which is why the study (separating the short-life components) is what unlocks the benefit. State treatment varies: some states conform to federal bonus, some decouple, and your CPA models the state side separately.
From estimate to filed deduction
The calculator gives you the Year-1 number. To claim it, you need an engineered study that documents the component basis and MACRS classification for your CPA. Cost Seg Smart studies start at $495 and are delivered in under an hour for simple residential. See a real report example or full pricing.