OBBB Act Interest in Alts Part 4a ~ Bonus Depreciation is Back

100% Bonus Depre­ci­a­tion Is Back and retroac­tive to Jan­u­ary 20, 2025.  What the “One Big Beau­ti­ful Bill” Means for You.

August 2, 2025

By Al DiNi­co­la, AIF®
1031 Tax Deferred Exchange Spe­cial­ists & DST Advi­sor
NAMCOA® — Naples Asset Man­age­ment Com­pa­ny®, LLC
Secu­ri­ties offered through MSC-BD, LLC, Mem­ber of FINRA/SIPC

The tax land­scape has just expe­ri­enced a seis­mic shift with the pas­sage of the “One Big Beau­ti­ful Bill” — (offi­cial­ly known as the An Act to pro­vide for rec­on­cil­i­a­tion pur­suant to title II of H. Con. Res. 14).  If you want the full tech­ni­cal name, it is “Estab­lish­ing the con­gres­sion­al bud­get for the Unit­ed States Gov­ern­ment for fis­cal year 2025 and set­ting forth the appro­pri­ate bud­getary lev­els for fis­cal years 2026 through 2034.” This sweep­ing leg­is­la­tion rep­re­sents the largest tax reform pack­age in recent his­to­ry, deliv­er­ing sub­stan­tial relief to both busi­ness­es and indi­vid­ual tax­pay­ers.  This was signed into law July 4, 2025. There is a lot to unpack with this so we will cov­er in two sep­a­rate arti­cles and pro­vide exam­ples in part 4b.

The cen­ter­piece of this leg­is­la­tion is the restora­tion of 100% bonus depre­ci­a­tion for qual­i­fy­ing busi­ness prop­er­ty, effec­tive for assets placed in ser­vice after Jan­u­ary 19, 2025, and the end of 2029. This is a com­pre­hen­sive over­haul that may touch a mirade of oppor­tu­ni­ties. This is not just anoth­er incre­men­tal tax adjust­ment. Busi­ness equip­ment pur­chas­es to fam­i­ly tax cred­its, and more all designed imme­di­ate finan­cial relief and poten­tial­ly stim­u­late eco­nom­ic growth. We will focus on the impact on real estate invest­ment as well as the poten­tial Delaware Statu­to­ry Trust (DST) impact. We will not touch on com­put­er soft­ware, qual­i­fied films, tele­vi­sion shows, live the­atri­cal pro­duc­tions and the oth­er poten­tial aspects.

We have point­ed to pre­vi­ous leg­is­la­tion (2022) where 100% bonus depre­ci­a­tion was per­mis­si­ble with a phase out over a num­ber of years.  We will cov­er the impli­ca­tion of this being uti­lized by investors. In the past cer­tain spon­sors of Delaware Statu­to­ry Trust (DST) did engage in cost seg­re­ga­tion analy­sis (to be reviewed lat­er) that pro­vid­ed sig­nif­i­cant ben­e­fits to investors. Under the new leg­is­la­tion any car­ry for­ward basis in the new prop­er­ty would be exclud­ed in the 100% depre­ci­a­tion.  How­ev­er, any addi­tion­al basis acquired would be eli­gi­ble for the 100% depre­ci­a­tion.  More details in Part 4b.

The restora­tion of 100% bonus depre­ci­a­tion rep­re­sents a mas­sive win for busi­ness­es of all sizes. Under this pro­vi­sion, com­pa­nies can imme­di­ate­ly write off the full cost of qual­i­fy­ing busi­ness prop­er­ty rather than depre­ci­at­ing it over sev­er­al years. Depre­ci­a­tion is a “non-cash” tax deduc­tion. Most tax deduc­tions, such as tax­es, insur­ance, main­te­nance and repairs, require a cash pay­ment to obtain a deduc­tion.  How­ev­er, depre­ci­a­tion is a non­cash deduc­tion, com­put­ed on the cost (pur­chase price) for the prop­er­ty.  Depre­ci­a­tion deduc­tion increas­es after-tax returns for real estate invest­ments by gen­er­at­ing deduc­tion.  Also, res­i­den­tial prop­er­ty is recov­ered (depre­ci­at­ed) more quick­ly than non-res­i­den­tial prop­er­ty. This added tax ben­e­fit encour­ages tax sen­si­tive investors to focus on res­i­den­tial prop­er­ty.

How did we get here

The back­drop for the com­pu­ta­tion of depre­ci­a­tion can be traced back to 1987. The Mod­i­fied Accel­er­at­ed Cost Recov­ery Sys­tem (MACRS) began on Jan­u­ary 1, 1987, as part of the Tax Reform Act of 1986. MACRS replaced the ear­li­er sys­tem known as ACRS (Accel­er­at­ed Cost Recov­ery Sys­tem), which had been in effect since 1981 under the Eco­nom­ic Recov­ery Tax Act of 1981. MACRS was designed to: sim­pli­fy depre­ci­a­tion rules, estab­lish stan­dard­ized recov­ery peri­ods, reflect more real­is­tic use­ful lives for dif­fer­ent asset types. The Tax Cuts and Jobs Act (TCJA) Sep­tem­ber 27, 2017, cre­at­ed oppor­tu­ni­ties for 100% bonus depre­ci­a­tion with a phase out. The OBBB,  has now rein­stat­ed the 100% bonus depre­ci­a­tion.

How It Works

The key date or ref­er­ence is placed in ser­vice after Jan­u­ary 19, 2025, and before Jan­u­ary 1, 2030. The amend­ed bonus depre­ci­a­tion pro­vi­sions rein­state 100% first-year depre­ci­a­tion for qual­i­fied prop­er­ty acquired with­in the time peri­ods. For exam­ple, if you pur­chase $100,000 worth of qual­i­fy­ing equip­ment, you can deduct the entire amount in the year of pur­chase. This may dra­mat­i­cal­ly reduce your cur­rent-year tax lia­bil­i­ty. Tax pro­fes­sion­als and investors need to pay atten­tion to the in-ser­vice date.

Who Ben­e­fits Most

Here is a par­tial list of who may ben­e­fit. Investors who own short-term rental (STR) own­ers & real estate pro­fes­sion­als may ben­e­fit. Small to medi­um-sized busi­ness­es look­ing to expand oper­a­tions as well as the acqui­si­tion and pur­chase of cap­i­tal-heavy indus­tries such as man­u­fac­tur­ing, con­struc­tion, and trans­porta­tion may uti­lize this pro­vi­sion. What may be over­looked is ser­vice busi­ness­es invest­ing in tech­nol­o­gy and equip­ment upgrades, tak­ing advan­tage of 100% depre­ci­a­tion and increas­ing prof­itabil­i­ty. Real estate devel­op­ers through spe­cial pro­vi­sions for qual­i­fied pro­duc­tion prop­er­ty as well as invest­ment real estate can take advan­tage of this to accel­er­ate invest­ment, devel­op­ment and poten­tial indi­vid­ual investor ben­e­fits.

Oth­er Depre­ci­a­tion & Expens­ing

The bill allows an addi­tion­al first-year depre­ci­a­tion deduc­tion equal to 100% of the adjust­ed basis of “qual­i­fied pro­duc­tion prop­er­ty,” which includes non­res­i­den­tial real prop­er­ty used in man­u­fac­tur­ing. This accel­er­at­ed write-off cre­ates imme­di­ate cash flow ben­e­fits by reduc­ing cur­rent-year tax oblig­a­tions, free­ing up cap­i­tal for rein­vest­ment and growth.

Cost Seg­re­ga­tion and Sec­tion 179

Cost seg­re­ga­tion and sec­tion 179 are com­ple­men­tary but dis­tinct tax strate­gies. Both may be used to accel­er­ate depre­ci­a­tion and reduce tax­able income. We will focus on real estate and investors who own prop­er­ty or prop­er­ty own­ing busi­ness­es.

Cost Seg­re­ga­tion is a method to reclas­si­fy build­ing com­po­nents into short­er depre­ci­a­tion lives build­ings and improve­ments (via asset break­down). This may accel­er­ate depre­ci­a­tion (typ­i­cal­ly 5, 7, 15-year lives instead of 39 years). The short­er-life an assets can also get 100% bonus depre­ci­a­tion. Cost seg­re­ga­tion stud­ies must be per­formed by qual­i­fied firm and not the investor. Exam­ples of qual­i­fy­ing assets via cost seg­re­ga­tions may be Car­pet­ing, Appli­ances, Win­dow treat­ments, Cab­i­netry (in some cas­es), Land­scap­ing, Cer­tain plumb­ing and elec­tri­cal sys­tems used specif­i­cal­ly for appli­ances, Park­ing lots, side­walks (15-year land improve­ments)

The Sec­tion 179 does not specif­i­cal­ly apply to the real estate but to cer­tain improve­ments. A tax pro­vi­sion allow­ing imme­di­ate expens­ing of qual­i­fy­ing prop­er­ty imme­di­ate deduc­tion for busi­ness equip­ment and some improve­ments. Only cer­tain improve­ments to com­mer­cial prop­er­ty and may com­bine with bonus depre­ci­a­tion. Roofs, HVAC, fire pro­tec­tion and alarm and secu­ri­ty sys­tems and oth­er costs may be uti­lized. Under the new Bill the lim­it increased to $2.5M, up from $1.25M. This helps busi­ness­es and real estate pro­fes­sion­als off­set even more of their income from the invest­ment.

In Part 4b we will pro­vide exam­ples of uti­liz­ing this 100% bonus depre­ci­a­tion. How­ev­er, there are a few ele­ments that need to be stressed. The asset needs to be acquired and placed in ser­vice start­ing Jan­u­ary 20, 2025. The asset also needs to be new to the tax­pay­er. If you have imme­di­ate ques­tions and need an exam­ple, please don’t wait for Part 4b and con­tact us.

NAMCOA® is a SEC reg­is­tered invest­ment advi­so­ry firm that pro­vides com­pre­hen­sive port­fo­lio man­age­ment, finan­cial plan­ning, and fidu­cia­ry deci­sion-mak­ing ser­vices on behalf of retire­ment plan spon­sors. Our Dif­fer­ence is sum­ma­rized by our fidu­cia­ry approach which enables us to bet­ter meet port­fo­lio and retire­ment plan objec­tives, result­ing in stronger risk adjust­ed returns for investors and peace of mind for Clients. We also focus on alter­na­tive real estate invest­ment. Many real estate investors are seek­ing tax deferred solu­tions uti­liz­ing §1031 exchanges or Oppor­tu­ni­ty Zones.

DSTs are not for all investors.  The acqui­si­tion of a DST is for accred­it­ed investors only.  Con­tact your invest­ment advis­er for addi­tion­al details on how a DST may be a solu­tion to your 1031 Exchange and suit­ed for your invest­ment future. For more infor­ma­tion on how to prop­er­ly set up an IRC 1031Tax Deferred Exchange or if you are an accred­it­ed investor and would like addi­tion­al infor­ma­tion on a DST con­tact Al DiNi­co­la at 239–691-8098 or email adinicola@namcoa.com.

This is not an offer to pur­chase or solic­i­ta­tion to pur­chase any secu­ri­ty, as such be made only through an offer­ing mem­o­ran­dum or prospec­tus.  Invest­ing in secu­ri­ties, real estate, or any invest­ment, whether pub­lic or pri­vate, involves risk, includ­ing but not lim­it­ed to the poten­tial of los­ing some or all of your invest­ment dol­lars when you invest in secu­ri­ties. You should review any planned finan­cial trans­ac­tions that may have tax or legal impli­ca­tions with your per­son­al tax or legal advi­sor.   NAMCOA, LLC is a Reg­is­tered Invest­ment Advi­sor, reg­u­lat­ed by SEC (Secu­ri­ties and Exchange Com­mis­sion). Our cor­po­rate office is locat­ed at 999 Van­der­bilt Beach Road, Suite 200, Naples Flori­da 34108. Secu­ri­ties Offered through MSC-BD, LLC, Mem­ber of FINRA/SIPC. 5 Cen­ter­pointe Dri­ve, Ste. 400 Lake Oswego, OR, 97035MSC-BD, LLC and NAMCOA are inde­pen­dent­ly owned and are not affil­i­at­ed.

Thank you.