For landlords, keeping your rental properties updated is a constant—and expensive—process. The good news? The IRS lets you deduct many of those costs from your taxes through depreciation. But while normal depreciation spreads those deductions out over decades, bonus depreciation lets you claim them all at once—and can be a useful weapon for landlords trying to cut down on their tax payments.
This guide breaks down what bonus depreciation is, how it works for rental properties, and how it differs from traditional depreciation. Plus, we’ll cover the latest updates for bonus depreciation in 2025, which got a major update with the passage of President Donald Trump's One Big Beautiful Bill—bringing back 100% bonus depreciation.
What Is Bonus Depreciation?
Bonus depreciation is a tax provision that allows property owners to deduct the full cost of certain improvements or equipment in the year they’re purchased, rather than spreading those deductions out over the asset’s “useful life.”
For landlords, this means you can upgrade your rentals and immediately offset taxable rental income—or even capital gains—on your tax return.
Purchases typically only qualify for bonus depreciation under certain circumstances, including the upgrades having a "useful life" of 20 years or less. We'll cover exactly what that means in a bit.
How Does It Differ From Normal Depreciation?
Before diving deeper into bonus depreciation, it’s important to understand how normal depreciation works.
When you buy a rental property or make improvements, you generally can’t deduct the full cost right away. Instead, the IRS requires you to spread those deductions over a set period:
- Residential rental property: 27.5 years
- Commercial property: 39 years
- Appliances, furniture, and other improvements: 5–15 years depending on class life
For example, a $10,000 upgrade to an HVAC unit would be depreciated over 27.5 years, giving you a $363 deduction annually for that entire span.
Want to see how to calculate depreciation for your own properties? Check out our full guide on how to calculate depreciation on a rental property.
How Bonus Depreciation Works
Now imagine instead of spreading out those deductions, you could take the full deduction in the year you buy it. That’s bonus depreciation in action.
An HVAC system typically wouldn't qualify. Per the IRS, they have a useful life of 27.5 years, which is over the 20-year threshold we mentioned earlier. However, most aesthetic or functional upgrades, like appliances or furniture, would qualify. Landscaping upgrades, too, can be depreciated right away, meaning landlords don't have to wait for the tax benefits.
It’s especially powerful for landlords managing multiple properties. For example:
- You sell one rental and make a $100K capital gain.
- You upgrade another property’s landscaping ($12,000) and buy new appliances ($3,000).
- With 100% bonus depreciation, you can deduct the full $15,000 that year, directly offsetting part of your capital gains.
This upfront deduction can also free up cash flow for further investments or repairs.
Bonus Depreciation in 2025: What’s Changing?
Originally enacted under the Tax Cuts and Jobs Act, 100% bonus depreciation began phasing down after 2022:
- 2023: 80%
- 2024: 60%
- 2025: 40%
- 2026: 20%
But the One Big Beautiful Bill brought it back to 100% for qualifying purchases made after January 19, 2025. That means landlords now have a fresh window to leverage this tax strategy.
If you're looking to make upgrades to your rental property, now would be a great time to take advantage of the 100% bonus depreciation window. Under the new bill, it extends through 2029.
What Qualifies for Bonus Depreciation?
Not every purchase is eligible. To qualify, an item must:
- Be used in your rental property business
- Have a useful life of 20 years or less (per IRS rules)
- Be “new to you” (purchases of used property are allowed if it’s new to your ownership)
Examples of Qualifying Assets:
- Appliances (refrigerators, washers, dryers, ovens)
- Furniture (beds, couches, tables)
- Land improvements (landscaping, fencing, driveways)
- Carpeting and flooring
- Small systems like window AC units
What Doesn’t Qualify:
- Entire rental buildings or major structural work (e.g., load-bearing walls)
- Large systems with a longer useful life, like full HVAC systems
- Improvements that aren’t directly tied to business use
A Cost Segregation Study can help landlords identify which parts of their properties qualify for faster depreciation.
Bonus Depreciation vs. Section 179
Section 179 is another tax deduction landlords often hear about. Like bonus depreciation, it lets you write off the full cost of qualifying purchases upfront—but there are differences:
- Section 179 is primarily for active businesses, so many rental property owners don’t qualify.
- Even when landlords do qualify, Section 179 can only reduce taxable income to zero.
- Bonus depreciation can go beyond zero, creating a tax loss that can offset other income.
Why Landlords Should Care
The return of 100% bonus depreciation under Donald Trump is big news for rental property investors. It allows you to:
- Immediately deduct qualifying upgrades
- Offset rental income or capital gains
- Free up cash flow for reinvestment
- Improve tenant satisfaction with updated amenities
For landlords using the BRRRR Method (Buy, Rehab, Rent, Refinance, Repeat), the “Rehab” step is now far more tax-efficient. Any sort of "rehab" upgrade to a rental property can yield major tax benefits right away, so long as it qualifies.
Related Reading: 6 Tips to Start Rental Property Business
Potential Drawbacks and Phase-Out Risks
While powerful, bonus depreciation isn’t permanent unless extended by Congress. Without further action, the bonus depreciation phase-out resumes after 2029.
Also keep in mind:
- It doesn’t apply to all property types
- It requires careful tax planning to avoid over-deductions
Consult a tax professional before relying on bonus depreciation for major purchases.
Final Thoughts
Bonus depreciation is one of the most landlord-friendly tax tools on the books—and with 100% bonus depreciation back in play, now is the time for property owners to make strategic upgrades.
Talk to a CPA to determine how this fits into your tax strategy—and protect your investments with fast, affordable landlord insurance from Steadily.
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