100% Bonus Depreciation 2025: A CRE Investor's Guide
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In one of the most significant tax developments for commercial real estate in years, 100% bonus depreciation is back for 2025.
Thanks to the "One Big Beautiful Bill Act," this powerful tax incentive has been fully reinstated, reversing the phase-down that had reduced it to just 60% in 2024.
For Utah commercial real estate investors, this is not a minor accounting tweak. It is a powerful, immediate, and actionable strategy to dramatically reduce your tax liability, boost your cash flow, and supercharge your investment returns.
But how do you use it? The key is a powerful tool called a cost segregation study. This guide will walk you through exactly what 100% bonus depreciation in 2025 for commercial real estate means and how you can use it to your advantage.
(Disclaimer: APEX CRE provides expert real estate services. We are not tax advisors. Always consult with a qualified CPA or tax professional to discuss your specific financial situation.)
First, What is Depreciation? (A Quick Refresher)
When you buy an investment property, the IRS understands that the building and its components wear out over time. To account for this, they let you take a "paper loss" each year called
depreciation.
- For commercial property, the building structure is depreciated slowly over 39 years.
- For residential property (like multi-family), it's 27.5 years.
This annual deduction reduces your taxable income, but it's a slow "drip." 100% bonus depreciation turns that drip into a firehose.
What is 100% Bonus Depreciation?
Bonus depreciation allows you to accelerate that process. Instead of taking a small deduction over decades, you can deduct a large percentage of an asset's cost in the very first year you buy it and place it in service.
The 2017 Tax Cuts and Jobs Act (TCJA) set this at 100%, but it was scheduled to phase out. The new 2025 law restores it to its full 100% power.
This means for any eligible asset, you can take a 100% tax deduction for its full cost in Year 1.
The critical question is: What is an "eligible asset"? To qualify for bonus depreciation, an asset must have a tax life of 20 years or less.
This is where investors get confused. "A building is 39 years. How does this help me?"
It helps you because of cost segregation.
The "Magic Wand": How Cost Segregation Unlocks Bonus Depreciation
A building is not just one thing. It's a collection of many different components, and the IRS knows this.
A Cost Segregation Study is a detailed, engineering-based analysis that legally re-classifies components of your building. It "segregates" assets from the 39-year building structure into shorter-lived categories.
Once an asset is re-classified as 5, 7, or 15-year property, it becomes eligible for 100% bonus depreciation.
What Can Be Segregated?
A typical study can re-classify 20-40% of a building's cost. Common examples include:
- 5-Year Property:
- Carpeting and vinyl flooring
- Decorative millwork and cabinetry
- Specialty lighting and electrical hookups for equipment
- Security systems and data cabling
- 7-Year Property:
- Office furniture and fixtures (if included in the purchase)
- 15-Year Property (Land Improvements):
- Parking lots and paving
- Sidewalks and curbing
- Exterior signage
- Landscaping and irrigation systems
All of these items can now be 100% written off in the year of purchase.
A Real-World Utah Example: The Power of 100% Bonus Depreciation
Let's see how this creates a massive financial impact for a cost segregation study in Utah.
The Scenario: You acquire a $5,000,000 industrial property in Salt Lake County. (Note: Land value is not depreciable. We'll assume the building/improvements are valued at $4,000,000 for this example.)
Case 1: WITHOUT Cost Segregation
- Depreciable Basis: $4,000,000
- Depreciation Method: Straight-line over 39 years
- YEAR 1 DEDUCTION: ~$102,500
Case 2: WITH Cost Segregation & 100% Bonus Depreciation
- A cost segregation study finds that 25% of the $4M basis can be re-classified.
- 15-Year Property (Parking lots, etc.): $600,000
- 5-Year Property (Specialty electrical, etc.): $400,000
- Total Segregated Assets: $1,000,000
- Bonus Depreciation: You take 100% of that $1,000,000 in Year 1.
- Plus: You still get the normal 39-year depreciation on the remaining $3,000,000 structure (~$76,900).
- YEAR 1 DEDUCTION: $1,000,000 + $76,900 = $1,076,900
The Result: By conducting a cost segregation study, you have increased your first-year tax deduction from $102,500 to $1,076,900. This creates a massive "paper loss" that can offset your other income (including W-2 income, for real estate professionals) and dramatically improve your immediate after-tax cash flow.
A Special Bonus: Qualified Improvement Property (QIP)
The 2025 law also solidifies a huge win for landlords and tenants. Qualified Improvement Property (QIP) is now 100% bonus-eligible.
- What is QIP? QIP is defined as any interior, non-structural improvement to an existing commercial building. Think of a typical tenant build-out: new walls, ceilings, lighting, plumbing, and interior doors.
- Why it Matters: The law makes QIP eligible for 100% bonus depreciation. This is a powerful incentive to upgrade properties and attract tenants.
Who Benefits from QIP?
- Landlords: If you offer a $200,000 Tenant Improvement (TI) allowance to attract a new tenant to your Lehi office space, you can now write off that entire $200,000 in the current tax year instead of depreciating it over 39 years.
- Tenants: If you are a business owner leasing a retail space at City Creek and you spend $100,000 on your own build-out, you get to take the 100% bonus deduction for that $100,000.
This makes leasing and upgrading commercial space in Utah more attractive than ever.
Who Should Use This Strategy?
This strategy is a powerful tool for:
- Investors buying commercial property (office, retail, industrial, multi-family, hospitality).
- Developers building new construction projects.
- Owners renovating or making significant tenant improvements.
- Investors who purchased property in the last few years but did not do a study (you can often do a "look-back" study to catch up on missed depreciation).
APEX CRE: Integrating Tax Strategy with Your Acquisition
Finding a great property is only half the battle. Structuring the investment for maximum after-tax returns is where true wealth is built.
At APEX CRE, we're not just brokers; we are investment partners.
- We identify prime properties in Salt Lake County and across Utah that are perfect candidates for cost segregation.
- We connect you with the top engineering firms in the region to execute a flawless, IRS-compliant study.
- We help you structure deals (like a 1031 Exchange) that can be combined with bonus depreciation for a powerful 1-2 punch.
Conclusion: Don't Leave This Money on the Table
The return of 100% bonus depreciation for 2025 is the single biggest tax incentive for commercial real estate owners today. It's a clear signal from the government to invest, improve, and build.
Don't let this opportunity pass you by.
Contact the APEX CRE team today at (385)-217-4005 to discuss how your next acquisition can become your biggest tax-saving move of the year.
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