Bonus Depreciation vs. Section 179: Two Valuable Tax Savings Strategies for Landlords

Landlords have numerous strategies they can use to save on their rental property income taxes, but understanding and managing them can cause headaches. Two tax rules that often confuse landlords and accountants are bonus depreciation vs. Section 179 deductions. Both can significantly lower your tax bill, but they apply to different situations.

This guide will clarify when and how these two tax rules apply. Plus, we’ll help you understand and implement these tax-savings strategies in a way that’s easy for landlords and CPAs.

Key Takeaways:

• Section 179 allows landlords to deduct the full cost of qualifying purchases, such as machinery, equipment, and vehicles used for their businesses.
• Bonus depreciation applies to new purchases and improvements to rental property assets such as appliances, fencing, HVAC systems, and other non-land and non-structure assets.
• Thanks to the One Big Beautiful Bill Act, qualifying assets are eligible for 100% bonus depreciation for the foreseeable future.
• Tools like TurboTenant Accounting make it easy to track and account for depreciation for both bonus depreciation and Section 179, but always consult your CPA.

First, Understanding Bonus Depreciation and How It Works

Standard depreciation allows you to deduct the cost of an asset over its useful life, which the IRS generally sets at 27.5 years for rental property assets. However, landlords who opt for bonus depreciation can deduct 100% of the cost of certain assets in the first year after they are placed in service (either by new purchase or new construction).

Bonus depreciation used to be less than 100% and was being phased out by 20% each year, but the One Big Beautiful Bill Act made 100% bonus depreciation permanent. Compared to standard depreciation, bonus depreciation provides an immediate and significant tax write-off, enabling you to depreciate what would have taken 27.5 years in just one year.

However, only part of a property’s assets are eligible for bonus depreciation, and to find out which, landlords must obtain a cost segregation study. This is an engineering study that breaks a property into its components and determines which are eligible for bonus depreciation and which qualify for standard depreciation. Typically, about 20-40% of a property’s assets are eligible for bonus depreciation.

Historically, these studies have been expensive and lengthy, affordable only to owners of higher-value properties. Now, landlords can find AI-powered software providers to automate and streamline the process, making it more affordable for smaller landlords.

Qualifying Assets:

• Personal property such as appliances, carpeting, and fixtures
• Land improvements such as fencing, gates, sidewalks, and landscaping
• Qualified improvement property (QIP), such as HVAC, plumbing, and electrical systems.

There is no limit to how much bonus depreciation you can claim (unlike Section 179), and you can use it to create a tax loss that can offset other income. Overall, it’s a massive win for landlords and an incentive for people to purchase more rental properties.

For a complete breakdown of what qualifies for bonus depreciation, check out our detailed guide on bonus depreciation, real estate, and the Big Beautiful Bill.

Now, Understanding the Section 179 Deduction 

The Section 179 deduction enables businesses to deduct 100% of the cost of qualifying assets in the year that they’re purchased, but only up to an annual dollar limit, which is $1.25M for 2025. 

While bonus depreciation is available for passive-income assets in rental properties, Section 179 is only available for property used in an active trade or business. Due to this nuance, only more active rental property owners can use Section 179, and they must prove to the IRS that they are ‘active’.

For a landlord to be eligible for Section 179, the IRS must classify their property as in use for “trade or business”. For that, landlords need to meet the Real Estate Professional Status (REPS) requirements, which involve a 750-hour threshold (50% of working hours) for participating in the property trade or business.

These hours are derived only from qualifying activities, including development, construction, operation, and management. All of these activities are considered active work, and not passive investing. Landlords who qualify typically include real estate agents, landlords with many properties they manage themselves, house flippers, and others who are active in the real estate or property management business.

If a landlord qualifies for REPS, they can deduct the full cost of applicable assets used for business purposes. These include machinery, equipment, technology & office assets, as well as possibly appliances and furniture. Unlike bonus depreciation, building and land improvements don’t qualify unless they’re done to a non-residential property.

Note: “Trade or business” rules and REPS requirements are complex, so you should always consult with a CPA before attempting to claim Section 179 deductions.

Bonus depreciation vs. Section 179: which applies to you?

If you’re a smaller landlord or don’t want to deal with the complexity of qualifying as an active trade or business, you’ll probably be happy just taking bonus depreciation. However, if you are an active business owner who spends significant time in real estate development and operations, Section 179 might make sense for you.

Here’s a comparison table that makes it easy to understand what each tax law provides and who it applies to.

TurboTenant Makes It Easy for Landlords and CPAs to Maximize Tax Savings

Whether you choose to use bonus depreciation, Section 179, or both, TurboTenant helps landlords reduce manual work and streamline bookkeeping. As a solution that’s built specifically for landlords and their accountants, TurboTenant makes the following much easier:

Simple Depreciation Tracking for Many Assets

Both bonus depreciation and Section 179 require you to track depreciation of multiple assets, either for the accelerated amount or the standard. TurboTenant makes it easy to break down your assets and enter depreciation amounts directly from cost segregation studies or CPA recommendations.

You simply create the asset, enter the depreciation timeline, and enter the total cost. For assets on the longer standard timeline, you can set depreciation amounts for future years to complete the work in advance.

Fast and Complete Depreciation Reports

Once you’ve entered your depreciation amounts for your various assets, you can instantly create a fixed assets schedule report. This report consolidates all of your depreciation information so you’ll see how much tax savings you’ll get now and in future years, based on what you’ve entered.

Ready to start saving on your rental property taxes?

While bonus depreciation is a great way to immediately start saving on new property and improvement assets with few restrictions, Section 179 is more complex. It has strict requirements that some landlords won’t qualify for, but the immense savings are worth the effort for active landlords.

Regardless of which strategies you choose, here are your next steps to tax savings:

1. Talk to your CPA. Figure out whether or not you qualify for Section 179 requirements and/or how to get a cost segregation study for bonus depreciation. Remember that you can use low-cost automated cost segregation software for an affordable, expedited study if you have standard rental properties with no complex considerations.
2. Track depreciation the easy way. Once you have your depreciation information squared away with your CPA, use TurboTenant Accounting to easily enter your depreciation information and get instant reports that show how much you’ll save on next year’s taxes.

Ready to streamline your depreciation tracking? Become one of the 850,000 landlords using TurboTenant to manage their rental properties and accounting today.