Lessons From Leah #2: The Hidden Power of Bonus Depreciation

Lessons From Leah #2: The Power of Bonus Depreciation

June 25, 2025

When it comes to real estate tax advantages, few strategies are as powerful—or as overlooked—as bonus depreciation. It’s not just a perk—it’s a tool that, when used properly, can completely transform your tax situation.

In fact, bonus depreciation is one of the main reasons I haven’t paid income taxes in nearly a decade.

Let’s explore why this strategy matters—and how investors at all levels can use it to build serious wealth.

What Is Bonus Depreciation?

Normally, residential real estate is depreciated over 27.5 years. That means you get to deduct a portion of the property’s value from your taxes every year—creating what's known as a "paper loss" that offsets your rental income.

But bonus depreciation goes a step further.

Thanks to provisions in the Tax Cuts and Jobs Act, certain components of a property—like appliances, flooring, HVAC, and more—can be depreciated much faster. Bonus depreciation allows investors to immediately write off a large portion (often 100%) of these costs in the first year of ownership.

That’s right: instead of waiting nearly three decades to realize the full benefit of depreciation, you can accelerate those tax deductions and unlock massive savings right away.

How Much Can It Save You?

Let’s say you purchase a property for $250,000. A cost segregation study breaks out $75,000 worth of components that qualify for bonus depreciation. If you’re eligible, that means you could write off $75,000 of income in year one.

For investors with large portfolios—or high W-2 or business income—that can add up to tens or even hundreds of thousands of dollars in tax savings each year.

In my case? We’re talking about millions.

Why High Earners Need to Pay Attention

Bonus depreciation is especially valuable for investors who are still actively earning income.

Whether you’re a physician, business owner, or salaried professional, the ability to use these paper losses against your income can dramatically reduce what you owe the IRS—and free up more capital to reinvest.

Even better? If you qualify as a real estate professional under IRS rules, these deductions may also apply to your active income—not just your rental income.

The Bottom Line

Real estate isn’t just about cash flow and appreciation—it’s also about strategy. Bonus depreciation is a prime example of how the tax code rewards investors who understand the rules and play smart.

📺 Want to learn how to use this strategy yourself?
Watch our free webinar: How to Maximize Bonus Depreciation

📘 Looking for more ways to build long-term wealth?
Explore our investor tools and resources: www.slaughterinvesting.com

Disclaimer: I’m not a CPA or tax advisor. I’m sharing this as an experienced investor who uses these strategies firsthand. Always consult with a qualified professional before making tax decisions.

“Lessons From Leah” is a series dedicated to helping real estate investors master the tools and strategies that fuel long-term success. Follow along for more insights on taxes, rentals, and wealth-building from Leah Slaughter and the team at Slaughter Investing.

#BonusDepreciation #RealEstateInvesting #LessonsFromLeah #SlaughterInvesting #TaxStrategy #PassiveIncome #CostSegregation #RealEstateProfessional #RentalPropertyTips #WealthBuilding