What 100 Percent Bonus Depreciation Means for Business Owners and Investors
A few years after being phased out, 100 percent bonus depreciation returns in 2026. For business owners and real estate investors, this isn’t just a tax perk. It’s a practical way to boost cash flow, potentially reduce tax liability and increase return on investment.
Here’s what you need to know about this valuable tool and how it can strengthen your financial strategy.
What Is 100 percent Bonus Depreciation?
Bonus depreciation allows you to deduct the full cost of eligible business assets in the same year they’re placed in service instead of spreading the deduction out over time.
Qualifying assets include:
- Equipment and machinery
- Computers and software
- Furniture and fixtures
- Certain leasehold or building improvements
- Some components of real estate (with the right planning)
Both new and used property can qualify if the asset is new to you and used in your business during that tax year.
How It Works
Let’s say your business buys $1 million worth of equipment. With 100 percent bonus depreciation, you can deduct the full amount in year one. At a 35 percent tax rate, that results in $350,000 in immediate tax savings.
You could use that cash to:
- Hire new team members
- Pay down debt
- Expand to a new location
- Purchase more assets
By reducing your upfront tax costs, bonus depreciation increases the after-tax return on your investments. That can support faster growth with less financial pressure.
How Real Estate Investors Can Benefit
While real estate itself usually doesn’t qualify for bonus depreciation, cost segregation can unlock similar benefits.
A cost segregation study breaks a property into components like flooring, lighting and landscaping. These items often have shorter depreciable lives such as five, seven or fifteen years, which may make them eligible for 100 percent bonus depreciation when properly classified.
This approach can generate significant tax savings and improve cash flow early in an investment’s life.
Now Is the Time to Prepare
100 percent bonus depreciation is more than a tax deduction. It is a strategy for keeping more of your money working inside your business or investment portfolio.
With full depreciation back in play for 2026 and beyond, it’s a great time to start planning.
If you have a major purchase or investment on the horizon, talk to your CPA or tax professional to explore how 100 percent bonus depreciation could fit into your overall strategy.
Shane Jackson is a financial advisor and area manager at Pinnacle’s Northshore office in Knoxville. He can be reached by email at Shane.Jackson@pnfp.com and by phone at 865.602.5229.
Shane Jackson is not a tax professional or attorney. Please consult your tax and legal advisors before making any financial decisions.
