The July 4th passage of new federal legislation, informally dubbed the “Big Beautiful Bill,” quietly reinstated a powerful tool for commercial real estate investors: 100% bonus depreciation.

Whether you own a 200‑key select‑service hotel or a Class‑B multifamily property, this is more than a tax perk, it’s a once‑in‑a‑cycle chance to supercharge cash flow, reinvest faster, and compound long‑term returns. Yet despite the headlines, many investors either misunderstand how to use it or fail to claim its full potential, risking both lost opportunities and unwanted IRS attention.

What Changed in 2025

Under the Tax Cuts and Jobs Act of 2017, investors could write off 100% of qualifying assets in the first year. That benefit began phasing down in 2023—until now. The 2025 bill restores the full 100% deduction for certain property improvements and short‑life assets (20 years or less), including:

• FF&E (furniture, fixtures, and equipment)
• Appliances and kitchen equipment
• Flooring and case goods
• HVAC and mechanical systems
• Interior renovations
• Site improvements such as parking lots and landscaping

For both multifamily and hospitality investors, this is about timing. By front‑loading depreciation, you can offset taxable income significantly in the year of acquisition or improvement, creating liquidity that can be reinvested for scale.

Why This Matters for Real Estate Investors

Let’s break it down in real numbers:

• Multifamily Example: Acquire a 200‑unit community for $25 million and complete a $3 million renovation. A cost segregation study might identify 30–35% of the property basis as eligible for immediate write‑off, potentially creating millions in year‑one deductions.
  
  
• Hospitality Example: Renovate a select‑service hotel with a $4 million PIP. Bonus depreciation could allow you to deduct a substantial portion of FF&E and renovation costs in the first year, offsetting income from the property and improving early‑stage cash flow.

Three Winning Strategies for 2025

1. Value‑Add Acquisitions with Cost Segregation

Whether it’s upgrading a garden‑style apartment community or refreshing a mid‑market hotel, combining cost segregation with bonus depreciation maximizes deductions and accelerates ROI.

Example: Alliance Residential reported a 15-20% cash‑flow improvement in year one by pairing bonus depreciation with cost segregation.

2. Ground‑Up Development in Opportunity Zones

Qualified Opportunity Zones (OZs) already offer deferred or reduced capital gains taxes. Stack those benefits with bonus depreciation on new construction, and the after‑tax return profile improves dramatically for both multifamily developers and hotel sponsors.

3. Short‑Term Hold + 1031 Exchange

Some investors target newer properties, capture bonus depreciation aggressively for 2–3 years, then roll gains into larger deals via a 1031 exchange, keeping capital gains deferred while repeating the process.

Case in point: A Texas‑based syndicator reportedly reduced taxable income by $1.2 million in the first year of this approach.

The IRS Is Paying Attention

Bonus depreciation is legal and intended as an incentive, but documentation matters. The IRS has stepped up audits around depreciation claims, particularly those involving cost segregation. Working with experienced tax advisors and engineering firms ensures your claims are both maximized and defensible.

Why Acting Now Matters

• Phase‑Down Is Coming: Full 100% bonus depreciation won’t last forever. Current provisions begin phasing out in 2027.
• Financing Costs: Interest rates remain above historic averages, locking in now can help preserve margins.
• Competitive Inventory: Both quality multifamily assets and well‑located hotels are in high demand. Waiting risks higher pricing and fewer opportunities.

A Strategic Lever, Not Just a Tax Move

We view tax incentives like bonus depreciation not as loopholes, but as strategic levers for accelerating growth and building legacy wealth. The difference between an average return and an exceptional one often comes down to how well you manage timing, structure, and execution.

For investors prepared to move decisively, 2025’s bonus depreciation rules represent a rare alignment of tax policy and market opportunity.

Sources:

1. Internal Revenue Service. “Publication 946: How To Depreciate Property.” 2024.
2. Tax Cuts and Jobs Act of 2017, Public Law No. 115‑97.
3. CBRE Research. “U.S. Multifamily Market Outlook 2025.” January 2025.
4. Alliance Residential public case study, 2022.
5. Greystar Real Estate Partners press statement, 2024.