The One Big Beautiful Bill restored 100% bonus depreciation permanently. Here's exactly how Miami investors are using it to offset W-2, business, and capital gains income this year.
Key Takeaways
- The One Big Beautiful Bill restored 100% bonus depreciation permanently for property placed in service after January 19, 2025.
- A $2M Miami short-term rental can generate $400K-$600K in first-year deductions through cost segregation + bonus depreciation.
- Pair with Real Estate Professional Status or the STR loophole to offset W-2 and business income — not just passive rental income.
If you bought Miami real estate between 2018 and 2022, you remember the magic. Cost segregation study, 100% bonus depreciation, a six-figure paper loss in year one, and a tax bill that suddenly looked very different.
Then the phase-down hit. 80% in 2023. 60% in 2024. 40% in 2025. The strategy that built half the wealthy LLCs in Brickell quietly stopped being a no-brainer.
Then Congress did something it rarely does: it gave the tool back. The One Big Beautiful Bill, signed in mid-2025, restored 100% bonus depreciation permanently for qualified property placed in service after January 19, 2025. As Miami's #1 real estate agent working with serious investors and business owners, I've watched the phones light up since the law passed. Here's what's actually happening on the ground in 2026 — and how Miami investors are using this window to keep more of what they earn.
What 100% Bonus Depreciation Actually Means
In plain English: when you buy a rental property, the building itself depreciates over 27.5 years (residential) or 39 years (commercial). That's slow. But inside that building are components — appliances, flooring, cabinets, landscaping, fencing, electrical systems serving specific equipment — that the IRS allows you to depreciate on much shorter schedules of 5, 7, or 15 years.
A cost segregation study identifies those components and reclassifies them. Bonus depreciation then lets you take the entire first-year deduction for anything with a recovery period of 20 years or less — in one shot.
On a $2M Miami short-term rental, a typical cost segregation study reclassifies 20% to 30% of the purchase basis into short-life property. That's $400,000 to $600,000 in immediate deductions in year one. Compare that to the roughly $50,000 you'd get under straight-line depreciation, and the difference becomes a wealth-building event.
Who Actually Benefits — And Who Doesn't
This is where most investors get it wrong. Bonus depreciation creates a tax loss on paper. But under normal passive activity rules, that loss can only offset passive income. If you have a W-2 job or active business income, you're stuck — the loss gets suspended until you sell.
There are two doors out. As I covered in my article 'Depreciation and 1031 Exchanges: The Miami Real Estate Tax Strategy Your CPA Hasn't Fully Explained,' the loophole is everything.
Door #1: Real Estate Professional Status (REPS). If you (or your spouse) spend 750+ hours per year and more than half of all working hours in real estate trades, your rental losses become non-passive. They offset W-2 and business income directly. This is the move for the spouse of a high-earning professional in Coral Gables, Pinecrest, or Key Biscayne.
Door #2: The Short-Term Rental Loophole. If your rental has an average guest stay of seven days or less and you materially participate (100+ hours and more than anyone else, or 500+ hours), it's not classified as a rental activity at all. The losses are non-passive automatically. No REPS required. This is why every Miami business owner I work with is suddenly interested in Airbnb-friendly buildings — and why short-term-rental-approved condos like the ones I covered in 'NoBe Parc Miami Beach' and '72 Park Miami Beach' have become the most strategically valuable inventory in the city.
- Miami Market Snapshot — May 2026:
- Median sale price for Miami-Dade condos: $415,000 (down 1.8% YoY in mid-market, up 4.2% in $3M+ luxury)
- Active condo inventory: 14,200 units (highest since 2010, ~13 months of supply)
- Average days on market: 87 days for condos, 58 days for single-family homes
- Short-term-rental-approved buildings under $1M trading at 11-14% premium to comparable non-approved units
The Math on a Real Miami Deal
Let me show you a real-numbers example. A business owner client of mine bought a $1.95M oceanfront condo in Sunny Isles in February 2026, classified as a short-term rental.
Purchase price: $1,950,000 Land allocation (non-depreciable): $390,000 (20%) Building basis: $1,560,000 Cost segregation reclassifies 28% to short-life property: $437,000 100% bonus depreciation in year one: $437,000 Building depreciation (straight-line on remainder): $40,000 Total first-year depreciation: $477,000
Her business generated about $620,000 in net income that year. Because she qualifies under the STR loophole — average guest stay under seven days, more than 500 hours of material participation through her management company — the entire $477,000 deduction offset her active income.
At her combined federal and Florida tax rate (Florida has no state income tax, which is half the reason this works), she saved roughly $171,000 in federal tax in year one. The property also cash-flows about $58,000 annually after expenses.
She didn't make $171,000. She kept $171,000 she would have otherwise sent to Washington — and now owns an appreciating Miami asset that throws off rental income.
Where This Strategy Is Most Powerful Right Now
Three pockets of the Miami market line up almost perfectly with bonus depreciation in 2026:
- 1Short-term-rental-approved condos — Buildings like The Crosby Worldcenter, Nexo Residences North Miami Beach, DUOS Wynwood, and the 7200 Collins project I broke down recently are zoned and structured for nightly rentals. The STR loophole works out of the box.
- 1Commercial property bought by the business that occupies it — Office condos in Brickell, warehouse/flex in Doral, retail storefronts in Coral Gables. The owner-occupant gets to deduct their own rent (paid to their LLC) AND take the bonus depreciation on the building. As I covered in 'Miami Office Rents Just Crossed $200/SqFt,' the math has flipped — owning beats renting decisively now.
- 1Mid-luxury single-family in Miami Beach, Edgewater, and Coconut Grove — When held as a high-end short-term rental ($800-$1,500/night), these properties combine appreciation, cash flow, and a massive front-loaded deduction.
The Window Isn't Permanent in Practice
The law made bonus depreciation "permanent." But every tax law in U.S. history has been permanent until the next administration changed it. The current 100% window is the most generous since 2017. Investors who lock in cost-segregated, bonus-depreciated assets in 2026 are buying not just real estate — they're buying a tax position the next Congress may not let exist.
Frequently Asked Questions
Q: Can I do bonus depreciation on a property I already own? A: Yes, through a look-back cost segregation study. You file Form 3115 (change of accounting method) and catch up all the missed depreciation in the current year as a single deduction. I've seen clients pull $200K+ in retroactive deductions from properties they bought three or four years ago.
Q: Does Miami short-term rental income qualify for the STR loophole automatically? A: No. You need average guest stay of seven days or less (most Airbnbs qualify) AND material participation. Material participation typically means 100+ hours and more time than anyone else, or 500+ hours total. Document everything — calendars, contractor calls, listing edits.
Q: What's the actual cost of a cost segregation study? A: For a $1M-$3M Miami property, typically $5,000-$9,000. The deduction it unlocks is usually 30-60x that cost. Engineering-based studies hold up under IRS scrutiny; "DIY" calculators don't.
Q: Will I have to recapture this depreciation when I sell? A: Yes — at a maximum 25% rate on the depreciation taken. But a 1031 exchange defers it indefinitely, and dying with the property eliminates it entirely through step-up in basis. Most serious investors plan to defer or die.
Whether you're buying your first investment property or restructuring a $10M portfolio, the 2026 window is the best the tax code has offered in years. Let's run the numbers on your specific deal.
Partnership Realty / Partnership Realty Inc / +1 (561) 629-0358 / carloscabalerealtor.com
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