Bonus Depreciation Calculator
A bonus depreciation calculator estimates the immediate tax deduction you can claim by expensing eligible property in the year it is placed in service. The calculator applies current bonus depreciation rates to reclassified building components, showing the difference between traditional depreciation and accelerated expensing under Section 168(k).
This tool helps investors model the impact of bonus depreciation phase-down schedules on cost segregation strategies. Results show year-one deductions, multi-year comparisons, and timing benefits for properties placed in service between 2026 and 2029.
Bonus Depreciation Estimator
Amount of 5, 7, and 15-year property from cost segregation study
Estimated Results
Bonus Depreciation Deduction
$300,000
First-Year Tax Savings
$111,000
MACRS on Remaining
$40,000
Total Year-1 Deduction
$340,000
This is a demonstration interface. Actual calculator functionality coming soon.
How This Bonus Depreciation Calculator Works
The bonus depreciation calculator applies Section 168(k) bonus depreciation percentages to qualified property based on the year placed in service. It identifies which assets qualify for bonus depreciation, applies the current phase-down rate, and calculates the immediate deduction available in year one.
The calculator multiplies the reclassified asset value by the applicable bonus percentage (60% for 2026, 40% for 2027, 20% for 2028, 0% thereafter). The remaining basis after bonus depreciation is then depreciated using standard MACRS schedules over 5, 7, or 15 years depending on asset classification.
Results show the split between bonus depreciation deduction and MACRS depreciation, total first-year deduction, and comparison scenarios across different placed-in-service years. The calculator demonstrates timing sensitivity by modeling the same property placed in service in 2026 versus 2027 or 2028, showing the incremental benefit of earlier placement.
What This Calculator Estimates
The calculator estimates the dollar amount of immediate expensing available under bonus depreciation rules. This is the portion of reclassified assets that can be deducted in full in year one rather than depreciated over multiple years.
It projects first-year tax savings by applying your marginal tax rate to the bonus depreciation deduction. The calculator also shows the remaining basis that will depreciate over subsequent years using MACRS schedules, allowing you to understand total year-one deductions versus multi-year spread.
Scenario comparisons demonstrate the value of timing decisions. The calculator models identical properties placed in service in different years, showing how bonus depreciation phase-down affects total tax benefits. This helps investors evaluate whether accelerating acquisition timelines makes financial sense.
Inputs Explained
Reclassified Asset Value: The total dollar amount of building components that have been reclassified into 5-year, 7-year, or 15-year property through cost segregation. This figure comes from a cost segregation study or calculator estimate and represents the portion of building basis eligible for accelerated depreciation.
Year Placed in Service: The tax year when the property was first placed in service or available for use. This determines which bonus depreciation percentage applies under the phase-down schedule: 60% for 2026, 40% for 2027, 20% for 2028, and 0% for 2029 and beyond. This input has the largest impact on results.
Federal Tax Bracket: Your marginal federal income tax rate determines the value of bonus depreciation deductions. A higher tax bracket produces more savings from the same deduction amount. The calculator uses this rate to convert deductions into actual tax savings dollars, showing the cash flow benefit of immediate expensing.
Typical Ranges, Rules, and Benchmarks
| Year Placed in Service | Bonus Depreciation % | First-Year Deduction (per $100k reclassified) | Tax Savings (37% bracket) |
|---|---|---|---|
| 2026 | 60% | $68,000 | $25,160 |
| 2027 | 40% | $48,000 | $17,760 |
| 2028 | 20% | $28,000 | $10,360 |
| 2029+ | 0% | $8,000 | $2,960 |
The table shows first-year deduction amounts for $100,000 in reclassified assets under different bonus depreciation scenarios. Deductions include bonus depreciation plus first-year MACRS depreciation on remaining basis. Tax savings assume a 37% federal bracket with no state tax or limitations applied.
Real Example Calculation
An investor completes a cost segregation study on a $3,500,000 retail property acquired in January 2026. The study identifies $700,000 in reclassified assets eligible for accelerated depreciation: $400,000 in 5-year property (fixtures, equipment), $200,000 in 7-year property (furniture), and $100,000 in 15-year property (site improvements). The investor is in the 37% federal tax bracket.
Using the bonus depreciation calculator, the investor enters $700,000 as the reclassified asset value and selects "2026 (60% bonus)" as the placed-in-service year. The calculator determines that 60% of the $700,000, or $420,000, qualifies for immediate bonus depreciation deduction in 2026.
Bonus Depreciation Deduction: $700,000 × 60% = $420,000 immediate deduction in 2026.
Remaining Basis for MACRS: $700,000 - $420,000 = $280,000 depreciates using standard MACRS schedules over 5, 7, and 15 years. First-year MACRS depreciation on this remaining basis is approximately $56,000 (using mid-year convention and applicable percentages).
Total First-Year Deduction: $420,000 (bonus) + $56,000 (MACRS) = $476,000. Tax savings = $476,000 × 37% = $176,120 in deferred federal tax.
The investor then models an alternative scenario where the property is not acquired until 2027, when bonus depreciation drops to 40%. In that scenario, bonus depreciation would be $280,000 (40% × $700,000), first-year MACRS approximately $84,000, total deduction $364,000, and tax savings $134,680. The 2026 acquisition produces an incremental $41,440 in first-year savings compared to waiting until 2027.
When This Calculator Is Most Useful
The bonus depreciation calculator is most useful when evaluating acquisition timing decisions. Investors can model whether closing a transaction in 2026 versus 2027 produces materially different tax outcomes, informing go/no-go decisions on accelerated purchase timelines.
Calculators help investors evaluate look-back studies on properties purchased in prior years. By entering the original placed-in-service year, investors can see what bonus depreciation was available at that time and estimate the potential catch-up adjustment from a retroactive cost segregation study.
The tool is valuable when comparing cost segregation scenarios with and without bonus depreciation. Some investors prefer to spread deductions over multiple years rather than taking large year-one hits. The calculator models both approaches, showing cumulative tax savings and cash flow differences over 5 and 10-year periods.
Limitations of This Calculator
Bonus depreciation calculators assume all reclassified assets qualify for bonus depreciation under Section 168(k). In reality, certain property types are excluded, including used property acquired before 2018, property used outside the U.S., and property subject to binding contracts before September 28, 2017. The calculator does not filter for these exclusions.
Calculators do not account for passive activity loss limitations, at-risk rules, or basis adjustments from entity structure. Real estate professional status, material participation, and active/passive income classification all affect whether bonus depreciation deductions produce immediate tax savings or carry forward as suspended losses.
Results are federal tax estimates only. State tax treatment of bonus depreciation varies significantly by jurisdiction. Many states decoupled from federal bonus depreciation rules or impose different phase-down schedules, reducing state-level benefits. Consult your state tax advisor to understand actual total savings.
Frequently Asked Questions
Can I elect out of bonus depreciation if I prefer slower depreciation?
Yes, taxpayers can elect out of bonus depreciation on a property-class-by-property-class basis. This election is made on a timely filed tax return and applies to all property in the same class placed in service during that tax year. Electing out may be beneficial if you want to spread deductions over multiple years, have passive loss limitations, or expect higher tax rates in future years. The calculator can model both scenarios.
How does bonus depreciation work with Section 179 expensing?
Section 179 and bonus depreciation are separate provisions that can be used in combination. Section 179 has a $1,160,000 limit (2026) and phases out after $2,890,000 in equipment purchases. Bonus depreciation has no dollar limit. Most real estate investors use bonus depreciation because Section 179 is generally limited to tangible personal property, not real property. The calculator focuses on bonus depreciation only.
What happens to bonus depreciation after 2028 when it phases to 0%?
After 2028, when bonus depreciation reaches 0%, assets will depreciate using standard MACRS schedules without immediate expensing. For 5-year property, first-year depreciation will be approximately 20% (mid-year convention), compared to 60% or more under bonus depreciation. This significantly reduces first-year deductions but does not eliminate the benefit of cost segregation. Congress may extend or modify bonus depreciation before it fully phases out.
Does the calculator account for used property versus new property?
Most calculators assume new property or used property acquired after September 27, 2017, which qualifies for bonus depreciation under current law. Used property acquired before 2018 does not qualify unless it meets specific requirements. If you are purchasing used property, verify bonus depreciation eligibility with your tax advisor before relying on calculator estimates.
Can I use bonus depreciation on a property I already own and have been depreciating?
Bonus depreciation generally applies only to property placed in service in the year the election is made. For existing properties, you can perform a look-back cost segregation study with a method change election to capture missed depreciation. However, the bonus depreciation rate applicable to the original placed-in-service year will apply, not the current year rate. The calculator can model look-back scenarios.
How does bonus depreciation interact with passive activity loss rules?
Bonus depreciation increases depreciation deductions but does not change passive activity loss limitation rules. If you are not a real estate professional and do not materially participate in the activity, bonus depreciation may generate larger suspended passive losses that cannot be used until you have passive income or dispose of the property. The calculator shows deductions but does not model usability under PAL rules. Consult your CPA to determine actual tax benefit timing.