How to Stack Cost Segregation with 100% Bonus Depreciation
Stack cost segregation with 100% bonus depreciation by running the cost seg study on property acquired with a binding contract on or after January 20, 2025 per OBBBA. The reclassified 5-year, 7-year, and 15-year portions automatically receive 100% bonus depreciation under amended Section 168(k). No additional election required for 100% bonus. Only the opt-down 40% election under Section 168(k)(10) requires a statement.
Mechanics
Cost seg reclassifies a portion of basis from 27.5 or 39 year recovery to 5, 7, or 15 year recovery. The reclassified portion is bonus-eligible property under Section 168(k)(2).
Bonus depreciation under amended Section 168(k) post-OBBBA is 100% for property acquired after January 19, 2025. The reclassified portion deducts entirely in year one as the bonus depreciation amount.
First-year deduction math
On a $1M depreciable basis with 25% reclassification ($250K to 5-year, 7-year, 15-year combined), the bonus depreciation on the reclassified portion is $250K. The remaining $750K depreciates on its regular MACRS schedule (27.5 or 39 year).
First-year combined deduction: $250K plus the first-year MACRS on the $750K remainder (roughly $20K to $27K). Total first-year deduction: $270K to $277K.
What does not get bonus depreciation
The real property portion (27.5-year residential or 39-year nonresidential) does not qualify for bonus depreciation. It depreciates on the regular MACRS schedule with the mid-month convention.
Exception: Qualified Improvement Property (QIP) under IRC Section 168(e)(6) has a 15-year recovery period and is bonus-eligible. QIP applies to interior improvements to nonresidential property placed in service after the building was first placed in service.
Frequently asked questions
- How does WeCostSeg coordinate with my CPA?
- Every engagement follows the three-touch CPA Coordination Protocol. Preliminary analysis CC'd to your CPA on intake, draft report shared five business days before final delivery, and Form 3115 filing coordinated when a Section 481(a) adjustment applies.
- Does OBBBA's 100% bonus apply to my acquisition?
- 100% applies to property under a binding contract on or after January 20, 2025 per Public Law 119-21. Property under a binding contract on or before January 19, 2025 stays on the legacy phase-down: 40% in 2025, 20% in 2026, 0% in 2027 and after.
- Is audit defense included?
- Yes. Every WeCostSeg engagement includes five years of written audit defense at no extra charge, aligned to the 13 Principal Elements of a Quality Cost Segregation Study under IRS Publication 5653 Chapter 4.
- Can I get a free preliminary analysis?
- Yes. Submit property details via the free proposal form or WhatsApp. Engineer-reviewed estimate returned within four business hours during US Eastern hours.
Zawwad Ul Sami, Founder
Zawwad Ul Sami is the founder of WeCostSeg, a founder-led cost segregation firm serving real estate investors across the US. He focuses on strategy, pricing, and the firm's overall direction.