--- title: "100% Bonus Depreciation Returns: Use §481(a) for Bigger Deductions" description: "Maximize 100% bonus depreciation with a powerful IRS-approved tool: the §481(a) adjustment. Learn how high earners are unlocking major tax savings in 2025." image: https://vipwealthadvisors.com/hubfs/bonus-depreciation-481a-adjustment.jpg --- [![VIP Wealth Advisors](https://vipwealthadvisors.com/hs-fs/hubfs/VIP_WEALTH_ADVISORS_LOGO_WEB_334x80_WHITE.png?width=334&height=80&name=VIP_WEALTH_ADVISORS_LOGO_WEB_334x80_WHITE.png "VIP Wealth Advisors")](https://vipwealthadvisors.com) - [Services](https://vipwealthadvisors.com/services) - [Financial Planning](https://vipwealthadvisors.com/financial-planning) - [Tax Planning](https://vipwealthadvisors.com/tax-planning) - [Investment Management](https://vipwealthadvisors.com/investment-management) - [Estate Planning](https://vipwealthadvisors.com/estate-planning) - [Stock Options](https://vipwealthadvisors.com/stock-option-exercise-strategies) - [Budgeting & Cash Flow Analysis](https://vipwealthadvisors.com/budgeting-cash-flow-analysis) - [Insurance Review & Recommendations](https://vipwealthadvisors.com/insurance-review) - [Retirement Planning](https://vipwealthadvisors.com/retirement-planning) - [Education Planning](https://vipwealthadvisors.com/education-planning) - [Cryptocurrency](https://vipwealthadvisors.com/cryptocurrency) - [Home Purchase & Income Properties](https://vipwealthadvisors.com/income-property-home-purchase) - [Hourly Support](https://vipwealthadvisors.com/hourly-support) - [Pricing](https://vipwealthadvisors.com/pricing) - [About](https://vipwealthadvisors.com/about) - [How it Works](https://vipwealthadvisors.com/how-it-works) - [Investment Philosophy](https://vipwealthadvisors.com/insights/investment-strategy) - [Press](https://vipwealthadvisors.com/press) - [Professional Affiliations](https://vipwealthadvisors.com/professional-affiliations) - [Credentials](https://vipwealthadvisors.com/cfp-designations) - [What VIP Really Means](https://vipwealthadvisors.com/insights/story-behind-vip-wealth-advisors) - [Insights](https://vipwealthadvisors.com/media-hub) - [Articles](https://vipwealthadvisors.com/insights) - [Videos](https://www.youtube.com/@MarkThePrivateCFO) - [Contact](https://vipwealthadvisors.com/contact) - [Client Portal](https://vipwealthadvisors.com/client-portal) Hit enter to search or ESC to close [.](https://vipwealthadvisors.com/client-portal) Hit enter to search or ESC to close 1. [Home](https://vipwealthadvisors.com/) 2. [insights](https://vipwealthadvisors.com/insights) 3. bonus depreciation 481a adjustment July 10, 2025 [Mark Stancato, CFP®, EA, ECA, CRPS®](https://vipwealthadvisors.com/insights/author/mark-stancato-cfp) # Unlocking Bonus Depreciation with the §481(a) Adjustment ![Illustration of IRS Form 3115 and tax depreciation charts under the new 2025 bonus depreciation law](https://vipwealthadvisors.com/hubfs/bonus-depreciation-481a-adjustment.jpg) Share this post: - - - ##### Share - - -   Real estate investors often assume the biggest tax breaks come when you buy a new property, but that's not always true. In 2025, a powerful combination of updated depreciation rules and existing IRS procedures allows you to unlock massive deductions on properties you already own. By leveraging a cost segregation study, Form 3115, and the IRC §481(a) adjustment, you can accelerate years of missed depreciation into a single tax year, without amending a single return. In this article, we’ll break down exactly how this works, including: - How the new law interacts with older properties - What the §481(a) catch-up adjustment really is - Why Form 3115 is the linchpin to triggering it - A full numerical example showing how it works - Critical compliance steps to execute this correctly Let’s dive in. ### 🏗️ The Setup: A Rental Property Purchased Years Ago Let’s say you bought a $800,000 rental property in 2020, allocating $700,000 to the building and $100,000 to land (which isn’t depreciable). You’ve been depreciating that $700,000 over 27.5 years using straight-line MACRS—about $25,455 per year. By 2024, you’ll have taken about $121,000 in depreciation. So far, this is standard stuff. But it’s also inefficient because, without a cost segregation study, you’re missing out on tens of thousands in faster depreciation and early tax savings. ### 💡 The 2025 Game Changer: New Law + Old Asset + Right Strategy With the passage of the "One Big Beautiful Bill," 100% bonus depreciation is now permanently back for all qualified property placed in service on or after January 20, 2025. This raises a big question: **What if I already own a property placed in service years ago—can I still claim 100% bonus depreciation?** **Answer:** Yes—if you reclassify assets via a cost segregation study and properly file IRS Form 3115. ### 📑 Enter Form 3115 + §481(a) IRS Form 3115 is used to request a change in accounting method—in this case, to change how you depreciate your rental property after performing a cost segregation study. When you file this form, the IRS doesn’t require you to amend prior-year returns. Instead, it uses Section 481(a) to determine the net adjustment between: - What depreciation you **should have taken** under the new method, **vs.** - What you actually took under the old straight-line method. You then deduct that entire difference in the year of change—a §481(a) catch-up deduction. ### 🔍 Real Numbers: Full Walkthrough #### 🧾 Property Details - Purchase Year: April 1st, 2020 - Building Value: $700,000 - No cost segregation was done originally #### 🧮 Depreciation Already Taken (2020–2024) | Year | Depreciation (27.5-year SL) | | --- | --- | | 2020 (9 mo) | $19,091 | | 2021–2024 | $25,455 × 4 = $101,820 | | **Total** | **$120,911** | #### 🛠️ 2025 Cost Segregation Study Results | Asset Category | MACRS Life | Amount | | --- | --- | --- | | 5-year property | 5 years | $60,000 | | 15-year improvements | 15 years | $40,000 | | Building structure | 27.5 years | $600,000 | Under the new method, bonus depreciation applies to 5 and 15-year assets if they are treated as placed in service on or after January 20, 2025. That’s precisely what Form 3115 allows. #### 🔁 Calculating the §481(a) Adjustment What you should have depreciated from 2020–2024 (under the new method): ♦️ 100% bonus depreciation on 5- and 15-year property in 2020: $60,000 + $40,000 = $100,000 ♦️ SL depreciation on the $600,000 structure: $600,000 ÷ 27.5 × 5 = $109,090 ♦️ Total new-method depreciation (2020–2024): $209,090 What you actually took:  $120,911 §481(a) catch-up deduction for 2025 = $209,090 – $120,911 = $88,179 This means the IRS lets you deduct $88,179 in 2025 to "true-up" your depreciation history, without amending a single return. ### 📅 What About 2025 Depreciation? You still get a **normal 2025 depreciation deduction** under the new method: - $600,000 structure × 1/27.5 = **$21,818** (annual building depreciation) So your **total 2025 deduction** is: ✅ $88,179 (catch-up via §481(a)) ✅ $21,818 (2025 regular depreciation) = **$109,997 total depreciation deduction in 2025** ### 🔓 Why This Works: IRS Procedure This isn’t a loophole. The IRS explicitly allows this strategy: - **Rev. Proc. 2015-13** and **Rev. Proc. 2019-43** permit automatic method changes using Form 3115 for depreciation purposes. - The IRS treats reclassified assets as **newly placed in service in the year of change,** making them **eligible for 100% bonus depreciation** if the law permits. - You take the **full §481(a) catch-up** deduction in that year. This is standard practice for real estate firms, cost segregation professionals, and even Fortune 500 companies using fixed asset systems. ### ⚠️ Compliance Notes To execute this strategy properly: - **Engage a qualified cost segregation firm.** Sloppy studies = disallowed deductions. - **File Form 3115 correctly, including a §481(a) calculation.** This form is complex and requires supporting documentation. - **Ensure your timing is right.** Assets must be treated as placed in service on or after January 20th, 2025 to qualify for 100% bonus. - **Track passive activity rules.** These deductions may be limited by passive income unless the taxpayer qualifies as a real estate professional or materially participates in the activity. ### 🧠 Bottom Line The return of 100% bonus depreciation in 2025 is big news, but the real strategic edge is how you combine it with: - A **cost segregation study** - A **Form 3115 method change** - A **§481(a) adjustment** This trifecta enables real estate investors to accelerate depreciation on older properties and potentially offset hundreds of thousands of dollars in passive income, all within a single tax year. ### 📣 Want Help Running the Numbers? Real estate investors don’t need another one-off tax trick—they need a partner who understands how to turn complexity into long-term advantage. That’s precisely what the 2025 tax law unlocks when paired with the right strategy. By combining a cost segregation study, IRS Form 3115, and the §481(a) adjustment, investors can accelerate years of missed depreciation into a single deduction—often six figures or more—even on properties they’ve owned for years. It’s a powerful example of what thoughtful, relationship-driven planning can deliver when you go beyond basic compliance. **[👉 Book a discovery call to find out how this strategy could lower your next tax bill](https://vipwealthadvisors.com/meeting)**   --- ### View More Articles by Topic - [Taxes (101)](https://vipwealthadvisors.com/insights/tag/taxes) - [Financial Planning (64)](https://vipwealthadvisors.com/insights/tag/financial-planning) - [Equity Compensation (49)](https://vipwealthadvisors.com/insights/tag/equity-compensation) - [Investments (37)](https://vipwealthadvisors.com/insights/tag/investments) - [RSU (26)](https://vipwealthadvisors.com/insights/tag/rsu) - [Retirement (24)](https://vipwealthadvisors.com/insights/tag/retirement) - [Tax Policy & Legislation (23)](https://vipwealthadvisors.com/insights/tag/tax-policy-legislation) - [Business Owner Planning (21)](https://vipwealthadvisors.com/insights/tag/business-owner-planning) - [Incentive Stock Options (20)](https://vipwealthadvisors.com/insights/tag/incentive-stock-options) - 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[↑](https://vipwealthadvisors.com/insights/bonus-depreciation-481a-adjustment#top) [![Financial Planning Association](https://vipwealthadvisors.com/hs-fs/hubfs/FPA-logo.png?width=189&height=100&name=FPA-logo.png "Financial Planning Association")](https://vipwealthadvisors.com/professional-affiliations) [![XY Planning Network](https://vipwealthadvisors.com/hs-fs/hubfs/XY_Planning_Network.png?width=189&height=100&name=XY_Planning_Network.png "XY Planning Network")](https://vipwealthadvisors.com/professional-affiliations) [![NAPFA National Association of Personal Financial Advisors](https://vipwealthadvisors.com/hs-fs/hubfs/NAPFA.png?width=189&height=100&name=NAPFA.png "NAPFA National Association of Personal Financial Advisors")](https://vipwealthadvisors.com/professional-affiliations) [![Fee Only Network Member](https://vipwealthadvisors.com/hs-fs/hubfs/Fee-Only-Network-3.png?width=189&height=100&name=Fee-Only-Network-3.png "Fee Only Network Member")](https://vipwealthadvisors.com/professional-affiliations) ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Mark Stancato, CFP®, EA, ECA, CRPS®", "sameAs" : [ "https://www.tiktok.com/@marktheprivatecfo", "https://www.youtube.com/@MarkThePrivateCFO", "https://www.instagram.com/marktheprivatecfo/", "https://www.linkedin.com/in/markstancato/", "https://www.facebook.com/marktheprivatecfo/" ], "url" : "https://vipwealthadvisors.com" }, "dateModified" : "2025-07-10T08:00:00-05:00", "datePublished" : "2025-07-10T08:00:00-05:00", "description" : "Maximize 100% bonus depreciation with a powerful IRS-approved tool: the §481(a) adjustment. Learn how high earners are unlocking major tax savings in 2025.", "headline" : "Unlocking Bonus Depreciation with the §481(a) Adjustment", "image" : "https://vipwealthadvisors.com/hubfs/bonus-depreciation-481a-adjustment.jpg", "mainEntityOfPage" : { "@id" : "https://vipwealthadvisors.com/insights/bonus-depreciation-481a-adjustment", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://vipwealthadvisors.com/hs-fs/hubfs/VIP-Wealth-Advisors-Logo-hz-750x394.png" }, "name" : "VIP Wealth Advisors" }, "url" : "https://vipwealthadvisors.com/insights/bonus-depreciation-481a-adjustment", "video" : { "@type" : "VideoObject", "contentUrl" : "https://youtube.com/shorts/Pj0fnaVXHZw", "description" : "Missed bonus depreciation on properties you already own? You might still be able to claim it—all in one tax year—thanks to a powerful IRS-approved strategy using Form 3115 and a §481(a) adjustment.", "embedUrl" : "https://www.youtube.com/embed/Pj0fnaVXHZw", "name" : "Missed Bonus Depreciation? The IRS Lets You Catch Up", "thumbnailUrl" : "https://img.youtube.com/vi/Pj0fnaVXHZw/maxresdefault.jpg", "uploadDate" : "2025-07-10T08:00:00-05:00" } } ``` ```json { "@context" : "https://schema.org", "@type" : "FAQPage", "mainEntity" : [ { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "A §481(a) adjustment is a change to taxable income that occurs when a taxpayer changes their accounting method. It can unlock prior-year deductions all at once when used strategically with bonus depreciation." }, "name" : "What is a §481(a) adjustment?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "In 2025, bonus depreciation reverts to 100% for qualified property placed in service on or after January 19. 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