5 Key Impacts of the One Big Beautiful Bill on Cost Segregation Strategies
- USA Cost Segregation
- Aug 5
- 3 min read
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (H.R. 1), a transformative piece of legislation reshaping several areas of federal tax policy. While the bill is broad in scope, several provisions have a direct and significant impact on Cost Segregation strategy and real estate investment planning. Below are the five most notable effects relevant to USA Cost Segregation clients and the market as a whole:
Extension and Enhancement of Bonus Depreciation Provisions
The OBBBA extends 100% bonus depreciation through at least 2027 for qualifying property placed in service during the specified window. This includes tangible personal property typically identified in cost segregation studies, such as:
Electrical distribution systems supporting equipment
Plumbing specific to kitchens or lab environments
Decorative millwork, fixtures, or flooring not considered permanent
These accelerated deductions, previously phasing down under the 2017 TCJA, make Cost Segregation studies even more valuable in securing early cash flow and reducing current-year and future tax liability.
In 2025 Bonus Depreciation was scheduled to be reduced to just 40%, but now taxpayers can take advantage of 100% Bonus Depreciation for properties placed in service after January 22nd, 2025. To Illustrate the difference, let’s look at how the increase in Bonus depreciation effects tax savings through Cost Segregation.
CURRENT
100% Bonus Depreciation
Purchase Price: $16,385,550
Total Reclassified Property: $7,611,280
First Year Deduction:
$7,611,280
First Year Cash Benefit
$3,250,787
PREVIOUS
40% Bonus Depreciation
Purchase Price: $16,385,550
Total Reclassified Property: $7,611,280
First Year Deduction:
$3,044,512
First Year Cash Benefit
$1,278,695
Permanent Classification Clarifications for Qualified Improvement Property
The OBBBA clarifies and makes permanent the classification of QIP as 15-year MACRS property, meaning it is eligible for 100% bonus depreciation under the revised Code §168(e)(6). This provides certainty for owners of commercial property making interior renovations, which can now be depreciated immediately if classified as QIP and identified appropriately in a quality Cost Segregation study.
IRS Emphasis on "Quality" Cost Segregation Studies for Audit Defense
The Act itself doesn’t directly impose new standards on cost segregation studies—but in conjunction with the recent ATG update (Rev. Pub. 5653, February 2025), the IRS is now clearly expecting Cost Segregation studies to:
Be prepared by experts with engineering and tax experience
Identify §1245 vs. §1250 property with precise legal and technical support
Include “engineering take-offs,” reconciliations, and indirect cost allocations
Given the increased likelihood of audit scrutiny in conjunction with larger accelerated deductions, USA Cost Segregation’s gold standard methodology and engineering-based studies provide critical protection and peace of mind.
Reduced Substantial Improvement Test for Rural Projects (QROFS)
Under the OBBBA, Qualified Rural Opportunity Funds (QROFs) now benefit from a reduced “substantial improvement” threshold—only improvements exceeding 50% of the adjusted basis are required. (rather than 100%).
This creates new synergies between Opportunity Zone planning and cost segregation, as the relaxed threshold may be easier to meet through strategic reallocation of property components in cost segregation reports. USA Cost Segregation is well-positioned to guide clients through both sides of this optimization through our partnership with The Strategic Group.
Heightened IRS Reporting Expectations for Capitalized Assets
OBBBA introduces new tax code sections (§6039K, §6039L) requiring expanded disclosure by investment funds (and potentially their property-level entities) regarding capitalized costs, employment, and asset use.
While these apply primarily to QOZ investments, they underscore the IRS’s trend toward tighter reporting around property classifications and capitalization. Clients should expect stricter scrutiny regarding treatment of items like:
Site Improvements
Electrical and Plumbing Systems
HVAC Dedicated to Specific Equipment
A well-documented, IRS-aligned, and engineering-based Cost Segregation study is an essential tool for compliance under this evolving framework. While USACS has set this standard from our inception, most providers fall short of these requirements, which is why it’s more important than ever to make sure you have the right company on your side.
Conclusion
The One Big Beautiful Bill Act offers new planning opportunities for real estate owners and investors—but also raises the bar for defensible depreciation strategies. Whether you’re investing in Opportunity Zones, improving commercial interiors, or developing rural property, USA Cost Segregation’s engineering-based studies deliver the precision, substantiation, and strategic insight you need to maximize benefits and stay audit-ready.
Ready to consult with experienced cost segregation professionals?
