The One Big Beautiful Bill Act, signed in July 2025, permanently restored 100 percent bonus depreciation for qualifying property placed in service after January 19, 2025. The IRS clarified application rules in Notice 2026-11, issued this past January.
For multifamily operators, 2026 is the first full year to plan around the change. Cost segregation studies are the mechanism that unlocks it.
Most operators are leaving the second half of the math on the table.
Before the body: I’m a real estate attorney, not a CPA. This piece is educational. Your specific cost segregation and depreciation strategy is a tax-professional conversation, not a blog conversation. Talk to your CPA. What follows is the structural story, not your tax position.
What cost segregation actually does
Buy a $5 million multifamily asset and the IRS default is straight-line depreciation over 27.5 years for the residential portion. That’s roughly $182,000 per year in depreciation against rental income — predictable, slow, and back-loaded.
Cost segregation reclassifies portions of that basis into shorter recovery periods. Specifically:
- Personal property (appliances, carpeting, interior fixtures, certain electrical, certain plumbing): 5- or 7-year recovery
- Land improvements (parking, fencing, landscaping, exterior lighting): 15-year recovery
- Qualified Improvement Property — interior non-structural improvements to nonresidential property: 15-year recovery
- Residential building structure: stays at 27.5 years
- Commercial building structure: stays at 39 years
The reclassified portions — typically 20 to 30 percent of the total basis on a multifamily property — drop into recovery periods that qualify for 100 percent bonus depreciation under the restored OBBBA rules. That means the operator can deduct the full reclassified amount in the first year of ownership, instead of spreading it over decades.
The mechanics aren’t new. The acceleration just shifted from an aggressive-but-temporary TCJA window to a permanent feature of the tax code.
What that’s worth
Illustrative math on a $5 million Class C multifamily acquisition: a typical cost segregation study might identify roughly 25 percent of basis as reclassifiable. Call it $1.25 million. At 100 percent bonus depreciation, that $1.25 million becomes a first-year deduction.
For an active investor who can use the deduction against rental income — and depending on Real Estate Professional Status, potentially against active income — the tax savings in year one can run into hundreds of thousands of dollars. The exact figure depends on the investor’s marginal rate, state conformity (New York and New Jersey, among others, don’t fully conform to federal bonus depreciation), and passive activity loss rules.
That’s why qualified tax professionals run the math, not blogs. The point isn’t the specific number. The point is that the deduction is real, the timing is in 2026, and it’s tied to having a cost segregation study done.
The acquisition-only problem
Most cost segregation studies are commissioned at acquisition. An engineering firm walks the property, catalogs components, allocates basis, and produces a report. The cost typically runs $5,000 to $15,000 for a multifamily asset.
The report goes into the file. The depreciation schedule gets entered into the tax software. The CPA uses it for the next several years.
Then ownership happens. Appliances fail and get replaced. HVAC systems get rebuilt. Carpeting cycles out unit by unit. Roofs get patched and eventually replaced. Every one of those replacements is, technically, a new asset with its own placed-in-service date and its own depreciation clock.
In practice, most operators don’t track this properly. Replacements either:
- Get expensed against current income (lower tax efficiency than depreciating with bonus treatment)
- Get rolled into the building basis (locked into 27.5- or 39-year recovery instead of 5-, 7-, or 15-year)
- Get tracked manually in a spreadsheet that nobody updates consistently
Each of those outcomes leaves money on the table. The cost segregation study was the first half of the math. Continuous tracking of replacements during ownership is the second half. Without both, the operator captures only the acquisition benefit and misses years of follow-on optimization.
Where component-level data fits
A cost segregation engineer needs an inventory of components — what’s there, where, when installed, what model, what cost. That same inventory is the operating foundation of any component-level predictive maintenance platform.
ForVue maintains 169 components per unit across 30 appliance types, with install dates, replacement history, costs, and condition trajectories — updated continuously. That isn’t adjacent to cost segregation data. That is cost segregation data, kept current.
What that enables in practice:
- At acquisition: the cost segregation engineer doesn’t need to do a from-scratch inventory walk. Structured component data already exists and exports cleanly into the study workflow.
- During ownership: every appliance replacement is captured with the install date, cost, and category needed to put it on its own depreciation clock from day one.
- At disposition: the asset basis is documented at a level that holds up under audit — and supports the next owner’s cost segregation study on day one.
The CPA still does the tax work. The cost segregation engineer still classifies and reports. ForVue is the data layer underneath. On a multi-property portfolio, the difference between “we’ll get the data together for you” and “here’s the structured export” is a meaningful operational improvement for everyone in the chain.
The careful caveat
Cost segregation is a tax strategy with real complexity. Passive activity loss rules apply — individual investors who don’t qualify as real estate professionals under IRC Section 469 generally can’t use bonus depreciation deductions to offset active income. State conformity to federal bonus depreciation varies meaningfully. Section 179 expensing interacts with bonus depreciation in ways that matter for specific entity structures. The binding contract date (not just the placed-in-service date) determines OBBBA eligibility.
None of that gets sorted out from a blog post. The structural point of this piece is narrow: 100 percent bonus depreciation is back, permanently. Cost segregation is the lever. Component-level operating data makes the lever work continuously instead of once at acquisition. Talk to your CPA about how the math applies to your specific situation.
The takeaway
If you bought multifamily after January 19, 2025, and you haven’t run a cost segregation study yet, the 2026 timing is in your favor. If you’ve already run one but you’re not tracking ongoing replacements at a component level, you’re capturing the acquisition benefit and walking away from the rest.
The operators who get the full math out of OBBBA are the ones whose data layer keeps the cost segregation study alive across the full hold period — not the ones who file the engineering report at closing and never look at it again.