100% Bonus Depreciation and Buying Commercial Property in Louisiana

If you buy a commercial building after January 19, 2025, you can deduct 100% of the cost of its short-life components in the first year you own it. The One Big Beautiful Bill Act, signed July 4, 2025, made that rate permanent. The building shell still depreciates over 39 years, but the paving, site lighting, specialty electrical, and interior finishes a cost segregation study separates from it can be written off immediately. On the right building, that turns a 39-year deduction schedule into a large first-year write-off.

ELIFIN is Louisiana’s #1 commercial real estate brokerage by number of sales, with Block agents covering Baton Rouge, New Orleans, and Lafayette and a proprietary database of 59,000+ commercial properties and 41,000+ owner contacts. Here is how the rule works for a buyer, who gets the most out of it, and what to line up before closing.

What Qualifies When You Buy a Commercial Building

Bonus depreciation applies to property with a recovery period of 20 years or less. Land never depreciates, and the building shell is 39-year property, so neither qualifies. What qualifies is everything a cost segregation study reclassifies into shorter lives:

• 5-year and 7-year property: dedicated electrical and plumbing for equipment, millwork, certain flooring, signage, and other personal property tied to the business use.
• 15-year land improvements: paving, curbs, site lighting, fencing, landscaping, and drainage.

Existing buildings count. Used property qualifies as long as you did not use it before the purchase. Before the 2025 law, the rate was stepping down: 80% in 2023, 60% in 2024, and 40% for property placed in service from January 1 to January 19, 2025. It is now 100% with no scheduled phase-down, so there is no deadline to buy against.

What It Looks Like on a $2 Million Purchase

A hypothetical example. You buy a building for $2,000,000. The land is valued at $400,000, leaving $1,600,000 of depreciable basis. A cost segregation study allocates $400,000 of that to 5, 7, and 15-year components.

At a 37% federal bracket, the extra $390,000 of year-one deduction is worth roughly $144,000 in federal tax, if you can use it. The actual allocation depends on the building, and first-year straight-line depreciation is prorated by the month you place the property in service. Your study and your CPA set the real numbers.

Who Gets the Most Out of It

A large deduction only helps if it offsets income you would otherwise pay tax on. That narrows the buyers who benefit most:

• Owner-users. A company buying its own facility, a physician buying medical office, or an operator buying a car wash or restaurant building can usually apply the deduction against the operating business’s income.
• Real estate professionals. Investors who qualify under the tax code’s real estate professional rules can generally use rental losses against other income.
• Investors with passive income to shelter. Passive investors can generally use the losses against other passive income, including gains from other property sales.

Property Types With the Most Write-Off

The more of a property’s value sits in land improvements (paving, site lighting, drainage), equipment-related systems, and buildout, the larger the first-year deduction. Types that tend to carry the most include convenience stores and fuel stations, car washes, restaurants, hotels, multifamily, medical office with significant buildout, retail centers with large paved parking fields, and industrial sites with heavy concrete paving (truck courts, laydown yards, and outdoor storage). Warehouse space with little yard and older office with little paving or site improvements carry less, though a cost segregation study usually finds something in any building.

Browse current opportunities on the ELIFIN deals page, and if you are buying for your own business, see the owner-occupied buy vs. lease guide.

What to Line Up Before You Close

1. Get a cost segregation estimate during due diligence

Many cost segregation firms will give a preliminary estimate from the address, price, and property type. Having that number before you finalize your offer tells you how much of the tax benefit is real on this specific building.

2. Plan for the exit

Bonus depreciation is a deferral. When you sell at a gain, depreciation on short-life components is recaptured as ordinary income at up to 37% federal, and straight-line depreciation on the building is taxed at up to 25%. A 1031 exchange into your next property can generally defer both.

If You Are Selling

Buyers who can use the deduction underwrite a building with heavy short-life content at a higher after-tax return than buyers who cannot. If your property fits that profile, it belongs in front of owner-users and tax-motivated investors. Talk to your ELIFIN agent about selling your property to the right buyer pool.

Frequently Asked Questions

Does bonus depreciation apply when you buy a commercial building?

Yes, to the parts of the purchase with a recovery period of 20 years or less, such as paving, site lighting, and equipment-related electrical. The building shell itself depreciates over 39 years and does not qualify. For property acquired and placed in service after January 19, 2025, qualifying components can be deducted 100% in the first year, and a cost segregation study identifies how much of the price they represent.

Does 100% bonus depreciation apply to used commercial property?

Generally yes. Buying an existing building qualifies as long as you did not use the property before the purchase and you acquired it after January 19, 2025. New construction and improvements placed in service after that date qualify as well.

How much of a commercial building’s price can be written off in year one?

It depends on the property. Land never depreciates, and the building shell is spread over 39 years. The share a cost segregation study moves into 5, 7, and 15-year property varies with the building type, paving and site improvements, and buildout, and that share is what can be deducted 100% in year one. Fuel stations, car washes, restaurants, hotels, multifamily, medical office, and industrial sites with heavy concrete paving tend to carry the most.

Can a passive investor use bonus depreciation against active income?

It depends. Often not. Losses from a rental property you do not materially participate in are generally limited to offsetting passive income. Owner-users whose operating business occupies the building and investors who qualify as real estate professionals are usually in the best position to use a large first-year deduction against their active income. Confirm your status with your CPA before you count the deduction in your underwriting.

What happens to bonus depreciation when I sell the property later?

It is recaptured. Depreciation taken on 5, 7, and 15-year components, including bonus depreciation, is taxed as ordinary income at up to 37% federal when you sell at a gain, and straight-line depreciation on the building is taxed at up to 25%. A 1031 exchange into another property can generally defer both.