The short answer: The One Big Beautiful Bill Act (OBBBA, July 2025) permanently restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025, reversing the old phase-down that had cut it to 40% in 2025. A cost segregation study reclassifies parts of a building into 5-, 7-, and 15-year property, which then also qualify for 100% bonus. On equipment-heavy buys like car washes and laundromats, this can turn a large share of the purchase price into a first-year deduction. Educational only, confirm with a CPA. IRS OBBBA guidance.
Bonus depreciation, and what OBBBA changed
Bonus depreciation (IRC § 168(k)) lets you deduct a percentage of the cost of qualifying tangible property in the first year, instead of spreading it over the asset's normal life. For years the rate was scheduled to phase down, 80% in 2023, 60% in 2024, 40% in 2025, heading to zero. Then the OBBBA reversed course and made 100% permanent for property acquired and placed in service after January 19, 2025.
| Placed in service | Bonus rate | Note |
|---|---|---|
| 2023 | 80% | Old phase-down schedule |
| 2024 | 60% | Old phase-down schedule |
| Jan 1, Jan 19, 2025 | 40% | Pre-OBBBA window |
| After Jan 19, 2025 | 100% | OBBBA, permanent |
| 2026 and beyond | 100% | No scheduled phase-out |
Crucially for buyers, used property qualifies, the equipment just has to be new to you and not bought from a related party. So the machines inside a business you acquire can be bonus-depreciated. Source: IRS.gov.
Section 179 is the sibling tool
Section 179 also expenses equipment in year one, capped for 2026 at $2.56 million with phase-out starting at $4.09M of purchases (inflation-adjusted from the $2.5M / $4M OBBBA levels). Where bonus and § 179 overlap, a CPA picks the mix, § 179 can be applied asset-by-asset, bonus is all-or-nothing per class. Source: IRS Pub. 946.
Cost segregation: breaking up the building
Buy real property and the default is brutal: 39-year straight-line depreciation. A cost segregation study, an engineering analysis, carves the building into components that legitimately belong in shorter MACRS classes:
- 5-year, specialized equipment, certain wiring/plumbing tied to processes.
- 7-year, fixtures and certain machinery.
- 15-year, land improvements: paving, curbing, drainage, signage, landscaping.
Everything the study pulls into 5-, 7-, or 15-year property then qualifies for 100% bonus depreciation, so it's deductible in year one. Only the bare 39-year shell stays slow.
Cost seg doesn't create new deductions. It moves them forward, from year 39 to year one.
Why car washes and laundromats shine
These are the poster children for cost seg because the building is a small part of the value, the money is in equipment and site work. A car wash's conveyors, blowers, dryers, vacuum stations, and water-reclamation systems, and a laundromat's washers, dryers, boilers, and specialized plumbing, all land in short-life buckets. Studies commonly reclassify a large fraction of such a property's depreciable basis into 5-, 7-, and 15-year property.
| Component | Life | Allocated | Year-1 deduction |
|---|---|---|---|
| Wash equipment, vacuums, reclaim (5-yr) | 5 | $800,000 | $800,000 |
| Fixtures & certain machinery (7-yr) | 7 | $200,000 | $200,000 |
| Paving, curbing, drainage, signage (15-yr) | 15 | $400,000 | $400,000 |
| Building shell (39-yr) | 39 | $600,000 | $15,385 |
| Total | $2,000,000 | ≈ $1,415,385 |
Roughly $1.4M of first-year deductions on a $2M building, because $1.4M got reclassified into short-life property that 100% bonus fully expenses, while only the $600k shell crawls along at 39 years. Your real allocation depends on the engineer's study; these percentages are illustrative but in line with what cost seg firms report for wash properties. Illustrative; see cost seg case studies (e.g., CSSI).
Watch the trade-offs
Front-loading depreciation lowers your future basis, so a later resale can trigger depreciation recapture taxed at ordinary rates. Big first-year losses can also run into passive activity and excess business loss limits depending on how you're involved. A cost seg study costs money and should pencil out. Model all of this with a CPA before you pull the trigger.
Equipment-heavy businesses reward buyers
See which boring, cash-flowing industries fit the cost-seg playbook.
Frequently asked questions
100% for qualified property acquired and placed in service after January 19, 2025. The OBBBA (July 2025) permanently restored the 100% rate and removed the phase-down that had dropped it to 40% in early 2025. Property placed in service earlier in 2025 may fall under the old percentages.
An engineering-based analysis that breaks a building's cost into components with shorter lives, 5, 7, or 15 years, instead of the default 39 years. Those short-life components qualify for bonus depreciation, so a buyer can deduct a large share of a building's cost in year one.
Because most of their value is in equipment and site work, not the plain building. Car wash conveyors, dryers, vacuums, and reclaim systems, and laundromat washers, dryers, and specialized plumbing, all qualify for 5-, 7-, or 15-year lives, which 100% bonus then fully expenses.
Yes, on qualifying tangible property in an asset purchase (or a 338(h)(10) deemed asset sale). Used property qualifies as long as it's new to you and not from a related party. Class V equipment plus short-life cost-seg components can be written off under 100% bonus in the year placed in service.
Keep reading
- Asset sale tax treatment, where Class V equipment sits.
- Goodwill amortization (Section 197), the slow, 15-year side.
- Tax benefits of buying a business, the full menu.
- LLC vs. S-corp, how losses flow to you.
- Industries and valuation.
Sources
- 100% bonus depreciation made permanent (OBBBA, 2025), IRS.gov guidance; IRC § 168(k).
- Section 179 limits ($2.56M / $4.09M for 2026) and MACRS lives, IRS Pub. 946.
- Cost segregation methodology, IRS Cost Segregation Audit Techniques Guide; illustrative car-wash results via CSSI.
