Can You Really Write Off an Investment Property in One Year?
A major tax change has created a new opportunity for real estate investors—but it doesn’t work quite the way you may have heard.
There’s a claim making its way through real estate and investment conversations lately that sounds almost too good to be true:
Buy an investment property and write it off in the first year.
Like many things involving taxes, there’s some truth behind the headline—but the reality is considerably more complicated.
A major federal tax law passed in 2025 permanently restored 100% bonus depreciation for certain qualifying property acquired after January 19, 2025. For real estate investors, particularly those purchasing long-term rental properties, that change could create an opportunity to accelerate substantial tax deductions that otherwise might have been spread over many years.
It does not, however, mean an investor can simply purchase a $400,000 rental home and deduct $400,000 from their income.
Understanding the difference is where this gets interesting.
What Actually Changed?
Real estate investors have long been able to depreciate qualifying rental property, essentially recognizing that buildings and their components wear out over time.
For residential rental real estate, the building itself is generally depreciated over 27.5 years. Land isn’t depreciable at all.
Bonus depreciation works differently. It allows certain shorter-lived qualifying assets to be deducted much more quickly, potentially in the year they’re placed in service.
The percentage had been scheduled to phase down after the temporary 100% provision from the 2017 tax law began expiring. The 2025 federal tax legislation changed course and permanently restored the 100% additional first-year depreciation deduction for qualifying property acquired after January 19, 2025.
For investors, that reopened a potentially powerful planning opportunity.
Where Real Estate Gets Interesting
A rental property may look like one asset when you purchase it, but for tax purposes, not every component necessarily has the same useful life.
The building itself may be depreciated over 27.5 years, while certain qualifying components can fall into shorter depreciation categories.
That’s where something called a cost segregation study can enter the conversation.
Cost segregation analyzes the components of a property and identifies assets that may appropriately be classified separately from the building. Depending on the property and circumstances, qualifying items can potentially include certain flooring, appliances, landscaping, cabinetry and specialized electrical or other components.
Rather than waiting decades to receive those deductions, qualifying shorter-life property may be eligible for the newly restored 100% bonus depreciation.
And that’s why some investors are suddenly paying much closer attention.
What Could That Look Like?
Consider a simplified example.
An investor purchases a Western New York rental property for $400,000. Suppose $80,000 of that purchase price is allocated to land, which isn’t depreciable, leaving $320,000 associated with the building and other depreciable assets.
Without additional planning, most of the building would generally be depreciated over 27.5 years.
Now imagine a properly performed cost segregation analysis identifies $70,000 of the property’s basis as qualifying shorter-life assets eligible for bonus depreciation.
Potentially, that $70,000 could be deducted in the first year rather than gradually over many years, while the remaining building basis continues along its normal depreciation schedule.
That’s a significant difference.
But notice what didn’t happen.
The investor didn’t deduct the entire $400,000 purchase price.
Instead, the new law potentially allowed the investor to accelerate deductions on qualifying portions of the investment.
A Tax Deduction Isn’t the Same as Getting the Money Back
This distinction is equally important.
Suppose an investor generates a $70,000 depreciation deduction.
That doesn’t mean the IRS sends them $70,000.
A deduction generally reduces taxable income. How much that ultimately saves an individual investor depends on their tax situation.
Rental real estate is also generally subject to passive-activity rules, which can limit whether rental losses can be used against other types of income. Some investors may be able to use those deductions immediately, while others may carry unused losses forward.
That’s why two people buying nearly identical investment properties could receive very different immediate tax benefits.
There Can Be Consequences Later
Accelerating depreciation isn’t free money.
Depreciation can affect the property’s adjusted tax basis, which becomes important when the property is eventually sold. Depending on the assets involved and how the transaction is structured, depreciation-related tax consequences can arise at sale.
An investor therefore shouldn’t purchase a property simply because someone on social media says there’s a giant first-year write-off available.
The real question is whether the property makes sense as an investment before the tax strategy is considered.
If the numbers work on the property and a CPA determines that accelerated depreciation creates an additional benefit, that’s a very different conversation.
Why This Could Matter in Western New York
This is where the change becomes particularly interesting locally.
Western New York continues to offer investment properties at price points that can be difficult to find in many larger metropolitan markets. Duplexes, small multifamily properties and single-family rentals remain part of the housing landscape throughout Buffalo, Erie County and Niagara County.
For someone who has already been considering adding a long-term rental to an investment portfolio, the return of permanent 100% bonus depreciation could make it worth revisiting the numbers with both a real estate professional and a qualified tax advisor.
The tax benefit shouldn’t turn a bad investment into a good one.
But it could potentially make an already good investment more attractive.
Start With the Property, Then Talk Taxes
There are really two professionals who should be part of this conversation.
A knowledgeable real estate professional can help an investor evaluate the property itself: purchase price, location, rental potential, condition, comparable properties and the realities of the local market.
A CPA or qualified tax professional can determine how the tax rules apply to that investor’s individual circumstances and whether strategies such as cost segregation and bonus depreciation make sense.
Those are two very different jobs, and both matter.
At Great Lakes Real Estate, our role is helping investors find and evaluate opportunities throughout Western New York. When tax advantages may be available, we’ll always encourage clients to discuss the specifics with the professional who understands their complete tax picture.
The Bottom Line
So, can you really buy an investment property and write it off in one year?
Not exactly.
The residential rental building itself generally remains subject to its normal depreciation schedule, and land isn’t depreciable. But under the new federal tax law, qualifying components of an investment property may potentially be eligible for 100% first-year bonus depreciation.
For the right investor and the right property, that can be significant.
And if you’ve been thinking about purchasing your first rental property—or adding another to your portfolio—this may be a good time to start asking questions.
Not just, “What can I deduct?”
But first:
“What opportunities are available?”
Great Lakes Real Estate can help you answer that part.
Call (716) 754-2550
Let’s take a look at what Western New York has to offer.
This article is for general informational purposes and is not tax or legal advice. Tax treatment depends on individual circumstances. Consult a qualified tax professional before making investment or tax-planning decisions.
