Accelerated depreciation is any method that lets you deduct more of an asset's cost in the early years and less later. For taxes, the main tools are the declining balance methods built into MACRS, Section 179 expensing, and bonus depreciation. For real estate, cost segregation is how you unlock accelerated depreciation on parts of a building.
This content is not tax or financial advice for you. Please talk with a CPA to find what's right for your situation.
Straight-line vs. accelerated: the basic difference
- Straight-line depreciation spreads the cost evenly. A $10,000 asset over 5 years gives you $2,000 a year.
- Accelerated depreciation front-loads the deduction. That same $10,000 asset might give you $2,000 in year one under the half-year convention, then $3,200 in year two, then smaller amounts after.
The total is the same either way. Accelerated methods just shift deductions earlier.
The main accelerated methods
| Method | How it works | Typical use |
|---|---|---|
| 200% declining balance | Double the straight-line rate, applied to the remaining balance | 5- and 7-year property under MACRS |
| 150% declining balance | 1.5 times the straight-line rate on the remaining balance | 15- and 20-year property, like land improvements |
| Section 179 expensing | Deduct the full cost in year one, up to an annual limit ($2.5 million for 2025, indexed) | Equipment, vehicles, some building systems for commercial property |
| Bonus depreciation | Deduct a percentage (now 100% for property acquired after January 19, 2025) in year one, no dollar cap | Any qualifying property with a life of 20 years or less |
How it applies to real estate
Buildings themselves must use straight-line depreciation: 27.5 years for residential and 39 years for commercial. But many parts of a building aren't the building in tax terms:
- Appliances, carpet, and cabinets can be 5-year property
- Some furniture and fixtures can be 7-year property
- Parking lots, fencing, and landscaping can be 15-year property
A cost segregation study identifies those parts. Once they're separated, they can use accelerated methods and bonus depreciation.
Example: the same $100,000, two ways
| Year | Straight-line over 27.5 years | 5-year property with 100% bonus |
|---|---|---|
| 1 | about $3,500 | $100,000 |
| 2 | about $3,600 | $0 |
| 3 | about $3,600 | $0 |
| Years 4–28 | about $3,600 each | $0 |
Same $100,000 in total deductions. Very different timing.
Pros of accelerated depreciation
- More cash now from lower taxes, which you can reinvest
- Time value of money: a tax dollar saved today is worth more than one saved in 20 years
- Can offset income in high-earning years
Cons and tradeoffs
- Depreciation recapture when you sell, often at ordinary income rates for personal property
- Smaller deductions later, which matters if your income rises
- Passive loss limits may delay the benefit for rental owners
- State differences, since many states don't follow federal bonus depreciation
When accelerated depreciation makes the most sense
- You're in a high tax bracket now
- You plan to hold the asset for several years
- You can use the deductions this year
- You want cash to grow your portfolio
Frequently asked questions
Is accelerated depreciation the same as bonus depreciation?
Can I choose straight-line instead?
Does accelerated depreciation increase my audit risk?
See what your property may qualify for
Run our 2-minute STR Qualification Quiz or model your Low / Mid / High cost segregation range.
Related guides
Depreciation for Real Estate Owners: The Basics
What is depreciation and how does it lower taxes on rental property? Learn the 27.5- and 39-year rules, what you can't depreciate, and common mistakes.
Read guideBonus Depreciation Rules for 2026: What Qualifies and How It Works
100% bonus depreciation is now permanent. Learn what qualifies in 2026, the January 19, 2025 cutoff, how it differs from Section 179, and how to use it.
Read guideHow Cost Segregation Changes Your Depreciation
See how cost segregation moves building costs into 5-, 7-, and 15-year depreciation, and how bonus depreciation turns that into a big first-year deduction.
Read guideDepreciation Recapture: What It Is and How to Plan for It
Depreciation recapture taxes back some depreciation when you sell. Learn the 25% and ordinary rates, see an example, and explore ways to reduce or defer it.
Read guideThis content is not tax or financial advice for you. Please talk with a CPA to find what's right for your situation.