If you're a high income earner or real estate investor, tax strategy isn’t optional it’s a lever you need to understand and use. With the recent signing of the One Big Beautiful Bill Act in 2025, one of the most powerful real estate tax tools cost segregation just became even more valuable.
Whether you're looking to reduce taxable income, increase cash flow, or scale your investment portfolio, this article breaks down how cost segregation, accelerated depreciation, and the Big Beautiful Bill can help you do it legally and strategically.
What Is Cost Segregation?
Cost segregation is a tax strategy that allows real estate owners to accelerate depreciation on certain parts of a property. Instead of depreciating an entire building over 27.5 years (residential) or 39 years (commercial), a cost segregation study identifies components (like flooring, lighting, plumbing, landscaping, etc.) that can be depreciated over shorter timelines (5, 7, or 15 years).
This leads to front loaded depreciation deductions, meaning you can drastically reduce your taxable income in the first few years after purchase, construction, or renovation.
What Is the “Big Beautiful Bill”?
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) a sweeping piece of tax legislation aimed at simplifying the tax code, encouraging investment, and supporting real estate development.
While it made some cuts to green energy incentives, it restored and permanently extended 100% bonus depreciation, making this one of the most favorable tax environments for property owners and high income earners in recent history.
How the Big Beautiful Bill Affects Depreciation & Cost Segregation
Here’s what high earners and real estate investors need to know:
1. 100% Bonus Depreciation Is Back and Permanent
The most significant change: 100% bonus depreciation is fully restored and made permanent.
This means you can deduct 100% of qualifying short-life property in the first year it’s placed in service. This massively increases the value of cost segregation studies, which identify these short life assets.
Before vs. After OBBB:
This change gives you maximum upfront deductions, allowing you to reinvest your savings or offset income from other sources.
2. Flexible Timing Rules for Placed in Service Dates
The bill also relaxed “placed in service” rules, meaning certain projects that previously didn’t qualify for bonus depreciation due to timing now do. This offers more planning flexibility, especially for larger developments.
⚠️ 3. Green Energy Incentives Scaled Back
The law did eliminate or phase out several Inflation Reduction Act era clean energy tax credits, including:
Section 179D (energy-efficient commercial buildings deduction)
Section 45L (energy-efficient homes credit)
If your cost segregation strategy relied on layering energy credits, those may need to be reassessed. However, pure depreciation strategies are now even more attractive, making this a net positive for most investors.
Benefits of Cost Segregation for High-Income Earners
Whether you're a business owner, physician, tech executive, or real estate investor, here’s why this strategy is so powerful:
1. Reduce Taxable Income Immediately
By accelerating depreciation, you reduce your current year’s taxable income especially valuable if you’re in a high tax bracket (32%–37%).
2. Generate Tax Refunds or Reduce Taxes Owed
If you’ve already paid estimated taxes or withheld taxes throughout the year, bonus depreciation deductions can lead to large refunds.
3. Reinvest Savings to Scale Your Portfolio
Less money going to the IRS means more cash available for:
Down payments on new deals
Paying off high interest debt
Investing in capital improvements
4. Offset Other Income (If You’re a Real Estate Professional)
If you or your spouse qualifies as a Real Estate Professional under IRS rules, cost segregation losses can be used to offset W-2 or active business income, creating huge tax arbitrage opportunities.
Example of a Real-World Cost Segregation Tax Benefit
Let’s say you purchase a $1 million commercial property.
Without cost segregation: Straight-line depreciation = ~$25,600/year
With cost segregation & bonus depreciation: First-year deduction = $180,000–$300,000
If you’re in the 37% tax bracket, that could mean $66,000–$111,000 in immediate tax savings.
Important Considerations
Who Should Use Cost Segregation?
Cost segregation and bonus depreciation are ideal for:
High-income earners with real estate holdings
Real estate investors scaling up their portfolios
Business owners who own their office or warehouse
Anyone planning to hold real estate for 5+ years
Final Thoughts: Why Now Is the Time to Act
The One Big Beautiful Bill created one of the most favorable tax environments in modern history for real estate owners. With 100% bonus depreciation restored permanently, and cost segregation more valuable than ever, 2025 is the year to get proactive.
If you’re looking to reduce your taxes, increase your cash flow, and grow your wealth, now is the time to talk to a CPA and a cost segregation specialist.
Need Help Getting Started?
Want a free estimate of how much a cost segregation study could save you?
Talk to a tax advisor or qualified firm today.
You’ve worked hard to earn it now it’s time to keep more of it.
Keep reading other bits of knowledge from our team.
Have a question about this article or want to learn more?