The 2025 Rule Change: 100% Bonus Depreciation Is Back
The federal tax package signed July 4, 2025—nicknamed “One Big Beautiful Bill”—permanently reinstates 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. That reverses the old phase-down schedule and materially improves first-year deductions for investors.
Quick nuance: Assets placed in service Jan 1–Jan 19, 2025 generally fall under a 40% bonus rate; after Jan 19, 2025, qualifying assets return to 100% (with an elective transition method for certain cases).
Why This Matters for Isle of Palms Investors
-
Bigger first-year deductions: With a cost segregation study, components of a rental (e.g., appliances, certain land improvements, furniture) that have recovery periods ≤20 years can be carved out and expensed at 100% in 2025 if acquired and placed in service after Jan 19, 2025. Improved cash flow: Large “paper losses” (depreciation) can lower 2025 taxes while rental income arrives in 2026—especially powerful for short-term rental owners who qualify to offset active income under material-participation rules. (Discuss with a CPA.)
-
Planning certainty: The law’s permanent treatment for 100% bonus depreciation (on qualified property after Jan 19, 2025) creates clearer multi-year planning versus the prior phase-down uncertainty.
What Counts—and What Doesn’t
-
Eligible at 100% (post-Jan 19, 2025): Tangible personal property used in your rental business (furniture, fixtures, appliances), certain land improvements (e.g., some hardscape), and other assets with ≤20-year class lives. Cost segregation helps identify and document these.
-
Not directly eligible: The building structure itself (27.5-year residential real property) isn’t bonus-eligible—but cost seg can reclassify many components into shorter-life buckets that are.
“One Big Beautiful Bill” in Plain English
The law changed the baseline again: instead of 40% bonus in 2025 (under prior rules), qualifying assets placed in service after Jan 19, 2025 are back to 100% expensing in year one. Several reputable tax sources, plus IRS and legislative pages, reflect these changes and effective dates.
And yes—done correctly, many investors finish the year with one big beautiful bill from the IRS… that’s much smaller than expected.
Example: IOP Beach Rental Placed in Service in December 2025
-
Purchase price: $1.45M
-
Cost segregation: identifies ~$350k–$500k of 5-, 7-, and 15-year property
-
Bonus depreciation: 100% (if acquired & placed in service after Jan 19, 2025) → potential six-figure first-year deduction
(Illustrative only; obtain a formal study and CPA guidance.)
Short-Term Rental (STR) Advantage in 2025
If your Isle of Palms property qualifies as a short-term rental and you materially participate, certain investors may use depreciation losses to offset active income (W-2/business) rather than only passive income—multiplying the benefit of 100% bonus on cost-seg assets. (CPA analysis required.)
1031 Exchange Timing Still Counts
Selling another property? A 1031 exchange into an Isle of Palms rental lets you defer capital gains and depreciation recapture—and you can still layer cost segregation and 100% bonus on the replacement property (subject to the same post-Jan 19, 2025 rules). Mind the 45-/180-day timelines. (Coordinate with a qualified intermediary and CPA.)
2025 Year-End Investor Checklist
| Step | Why it matters |
|---|---|
| Confirm acquisition & “placed in service” dates (after Jan 19, 2025) | Needed for 100% bonus eligibility on qualifying assets. |
| Order a cost segregation study | Quantifies assets eligible for 100% expensing. |
| Line up furnishings & improvements | Make sure qualifying assets are in service before year-end to claim in 2025. |
| Coordinate with your CPA early | STR material participation and entity choices affect how losses apply. |
| If doing a 1031, track 45/180-day windows | Preserve deferral and align with 2025 in-service deadlines. |
Why Choose Isle of Palms Now
-
High revenue potential with well-established STR demand
-
Constrained island supply supports long-term values
-
Clearer rules than many emerging beach markets
Pair those fundamentals with 100% bonus depreciation in 2025, and the after-tax ROI can be compelling. (We’ll underwrite both pre-tax and after-tax cash flow so you can compare apples to apples.)
Let’s Turn Your 2025 Into “One Big Beautiful Bill” (the good kind)
We’ll help you:
-
Identify properties with strong rent comps
-
Model after-tax returns under 100% bonus rules
-
Coordinate cost seg providers & STR compliance
-
Support 1031 timelines and closing targets
Disclaimer: This content is for informational purposes only and is not tax, legal, or financial advice. Tax laws change and individual situations vary. Always consult your CPA, tax strategist, or financial professional to confirm how these strategies apply to your specific situation.
