Financial Glossary
Bonus Depreciation
Bonus depreciation is a tax provision that allows businesses to immediately deduct a specified percentage of the cost of qualifying property in the year it is placed in service, rather than depreciating it over its standard useful life. It applies to new and certain used property, including equipment, machinery, and improvements to nonresidential real property that qualify as Section 179 property or specific listed categories. The available percentage and eligible asset classes have changed through various tax legislation, so the applicable rules depend on when the property was acquired and placed in service.
Problem & Application
Campground, RV park, marina, and self-storage operators making capital improvements -- from building new restroom facilities to installing electrical pedestals or purchasing grounds equipment -- can generate significant first-year deductions through bonus depreciation. When combined with a cost segregation study that reclassifies structural components into shorter-lived categories, the tax benefit can substantially reduce or eliminate taxable income in the year of investment. Real estate professionals and STR operators who materially participate may also be able to use these losses to offset other income. The rules around bonus depreciation changed meaningfully in 2025. The applicable percentage now turns on when the asset was acquired, while the year you claim the deduction is set by when it was placed in service.
In Short
Bonus depreciation is a legitimate and substantial tax tool for capital-intensive businesses, but its value depends entirely on applying the correct percentage, asset classification, and entity structure. The benefit is real; the rules require getting the details right.
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Two dates, two different jobs.
The year you claim bonus depreciation is the year the property is placed in service — ready and available for rent. That is not necessarily the year you bought it, so a property purchased one year and first listed the next takes its deduction in the second year.
The rate you get is set by when you acquired it. 100% for property acquired after January 19, 2025. Property acquired on or before that date stays on the old phase-down, which is 20% for anything placed in service in 2026.
Acquisition is measured by the written binding contract, not the closing, and there is no election to opt into 100%.