Bonus Depreciation Is Ending: Why Cost Segregation Still Works Even though bonus depreciation dropped to 80% in 2023 and will decrease by 20% each year until it is phased out in 2027, cost segregation remains incredibly valuable because it works regardless of the bonus percentage. Cost segregation analysis identifies components of your property eligible for faster depreciation, providing tax savings upfront by reclassifying assets into shorter categories like 5, 7, or 15-year property.
These accelerated deductions significantly reduce your taxable income, even without full bonus depreciation. Remember, bonus depreciation is just a temporary enhancement tied to when the asset was “placed in service” (must be operational by the end of the tax year). As of now, we highly anticipate there will be a new tax bill extending 100% bonus depreciation early in 2025. As this tax landscape changes, cost segregation provides a stable, powerful mechanism for maximizing depreciation benefits.
Cost Segregation Value During Bonus Phase-Down
- Bonus Schedule: Bonus depreciation dropped to 80% in 2023 and will decrease by 20% each year until it's gone in 2027.
- Cost Segregation Value: It remains incredibly valuable because it identifies components eligible for faster depreciation (5, 7, or 15-year property).
- Benefit: These accelerated deductions significantly reduce your taxable income even without 100% bonus.
- Trigger Date: Bonus applies based on when the asset was placed in service (must be operational by December 31st of the tax year).
- Future Outlook: We highly anticipate a new tax bill with extension to 100% bonus depreciation early in 2025.
