The One Big Beautiful Bill Act (OBBBA) permanently restored 100% bonus depreciation for qualified property placed in service after January 19, 2025 — the most significant tax-acceleration tool available to real estate investors since the 2017 TCJA phase-down. For BRRRR sponsors, the interaction between placed-in-service date, a cost segregation study, and first-year deduction size can materially change after-tax returns on the same deal.
This is general information, not tax advice. Consult a qualified CPA before making depreciation elections. Sources: Wiss bonus depreciation 2026 guide, IRS Notice 2026-11, and KMCO cost segregation overview.
What OBBBA changed for real estate investors
Before OBBBA, bonus depreciation had phased down to 20% for property placed in service in 2025. OBBBA restored 100% for qualifying property placed in service after January 19, 2025, and made the provision permanent — removing the sunset anxiety that shaped 2024 acquisition timing.
IRS Notice 2026-11 provides interim guidance on how taxpayers should apply the restoration, including coordination with existing MACRS rules and transition property. Investors should confirm current IRS publications with their tax advisor as additional guidance issues.
| Provision | Pre-OBBBA (2025) | Post-OBBBA |
|---|---|---|
| Bonus depreciation rate | 20% | 100% |
| Placed-in-service threshold | Various | After Jan 19, 2025 |
| Permanence | Phasing down | Permanent |
Cost segregation: unlocking shorter-lived components
A cost segregation study is an engineering-based analysis that reclassifies portions of a building’s purchase or construction cost from 27.5-year residential rental property (or 39-year commercial) into 5-, 7-, and 15-year MACRS property classes. Those shorter-lived assets qualify for 100% bonus depreciation in the year placed in service.
Typical reclassified components:
- Carpeting, vinyl flooring, and decorative fixtures
- Cabinetry and appliances (where separable)
- Landscaping, fencing, and site improvements
- Parking lots and sidewalks
- Specialty electrical and plumbing for equipment
KMCO notes that cost seg studies are most valuable on properties with $500K+ basis and meaningful personal-property or land-improvement components — exactly the profile of a BRRRR duplex or four-unit after rehab.
Worked example: BRRRR investor with cost seg
Scenario: Investor acquires a distressed Milwaukee duplex for $245,000, invests $73,000 in rehab, and places the stabilized rental in service in Q3 2026.
| Step | Detail |
|---|---|
| Total basis (land excluded) | ~$285,000 building + improvements |
| Cost seg reclassification | |
| 100% bonus on reclassified assets | ~$100,000 first-year deduction |
| Remaining 27.5-year basis | |
| Year-one total depreciation | ~$106,730 |
Without cost seg, straight-line on $285,000 building basis yields roughly $10,360/year — a 10x difference in year-one tax shield. The actual numbers depend on land allocation, study quality, and entity structure; your CPA models the file.
Placed-in-service timing: If rehab completes in December 2026, the property is generally placed in service in 2026 and captures the 100% bonus that year. If permitting delays push completion to January 2027, the deduction lands in 2027 — same rehab, different tax year. That is why closing speed on acquisition and draw-funded rehab matters for tax planning.
How Jaken’s products control placed-in-service timing
Fast hard-money closings are not just about winning offers — they let sponsors control when a property crosses placed in service:
| Product | Tax-planning role |
|---|---|
| Fix and flip loans | Acquire and fund rehab draws on a defined timeline |
| Hard money lenders | Bridge capital with 7–10 day close — start the rehab clock sooner |
| DSCR loans | Permanent exit after stabilization — basis established at refi |
An investor who closes acquisition in March, completes rehab by August, and leases by September places the property in service in the same tax year — capturing 100% bonus on cost-seg reclassified assets before year-end. A sponsor stuck in a 45-day bank approval loses months of depreciation timing optionality.
Pair acquisition with fix and flip loans or state-level hard money, run a cost seg study at stabilization, and exit to DSCR permanent debt when rents support the ratio.
Who benefits most in 2026
- BRRRR investors with meaningful rehab spend (higher reclassifiable basis)
- Value-add multifamily sponsors with site improvements and unit interiors
- Ground-up builders placing new construction in service after Jan 19, 2025
- High W-2 or passive-income investors who can use accelerated deductions against other income (subject to passive activity and at-risk rules — CPA required)
Risks and limitations
- Passive activity loss rules may limit immediate use of deductions against W-2 income
- Recapture applies on sale — bonus-depreciated assets recapture at 25% (unrecaptured Section 1250) or ordinary rates depending on asset class
- Cost seg study cost — typically $5K–$15K; justify on basis size and hold period
- State conformity — not all states follow federal bonus depreciation rules
Bottom line
OBBBA’s permanent 100% bonus depreciation, combined with a cost segregation study, can deliver a six-figure first-year deduction on a typical BRRRR project. The placed-in-service date — controlled by acquisition speed and rehab timeline — determines which tax year captures it. Fast hard money and fix-and-flip closings are a capital tool and a tax-timing tool.
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General information only — not tax advice. Consult a qualified CPA. Rates, terms and conditions offered only to qualified borrowers. Jaken Finance Group only finances non-owner occupied investment properties.