100% bonus depreciation is back and permanent. Paired with a cost segregation study, a Michigan single-family portfolio can generate a large first-year paper loss. Whether that loss reduces your tax bill this year depends on rules most marketing skips. Here is the whole picture.
Residential rental property normally depreciates over 27.5 years. Bonus depreciation and cost segregation pull a large share of that deduction into year one.
When you buy a rental, the building (not the land) is deducted over 27.5 years. On a $1.2M portfolio with 15% land value, that is roughly $37,000 a year against rental income, without writing a check.
The July 2025 tax law made 100% bonus depreciation permanent for qualifying property acquired and placed in service after January 19, 2025. It only applies to property with a recovery period of 20 years or less, so the building shell itself does not qualify.
An engineering-based study separates flooring, cabinetry, appliances, fixtures, driveways, fencing, and landscaping from the structure. On single-family rentals these commonly total 20 to 30% of depreciable basis, and all of it becomes bonus-eligible.
A study on one $120K house rarely pays for itself. A study across 10 similar houses bought in one closing does: one engagement, one site visit pattern, one report, applied across every door.
Illustrative figures. Your allocation comes from an actual cost segregation study and your purchase price allocation.
B-class single-family rentals, tenanted at closing, bought through Offer Now Michigan as a single transaction.
Rental losses are passive by default. W-2 salary, professional practice income, and bonuses are non-passive. Passive losses do not reduce non-passive income unless an exception applies. For a physician or attorney, that is the whole question.
| Your situation | Can the first-year loss offset salary or practice income? | What the loss does instead |
|---|---|---|
| Full-time W-2 professional, no other real estate activity | Generally no. The loss is passive. | Shelters the portfolio's rental income (often for years), offsets other passive income such as syndication distributions, carries forward indefinitely, and is released in full when the property is sold in a taxable sale. |
| Spouse qualifies as a real estate professional (joint return) | Often yes. This is the most common structure for high-income households. | The spouse must spend more than 750 hours a year and more than half of their working time in real property trades or businesses, and the household must materially participate in the rentals (a grouping election usually helps). Hours must be documented. |
| You already have passive income (other rentals, fund distributions, a business you do not materially participate in) | No, but it offsets that passive income dollar for dollar. | Many physicians and attorneys already hold passive positions. A cost-segregated portfolio can neutralize that income stream for several years. |
| You run your practice through an entity and are winding toward retirement | Depends on the year's mix of income. | Suspended losses release when the asset is sold, which can be timed against a high-income year or paired with a 1031 exchange to keep deferring. |
Every door in a portfolio purchase is placed in service together, so the entire first-year deduction lands in a single tax year that you choose.
Cost segregation firms price by engagement complexity. A portfolio of similar houses is one of the most efficient studies there is.
If your loss is passive, it needs passive income to offset. A 10-door portfolio produces that income itself, so the deduction is used rather than stranded.
The portfolio has to stand on its own: tenanted, cash-flowing, professionally managed. Tax benefits are the second reason to buy it. We underwrite the first reason before we show you anything.
Door count, price band, counties, cash flow floor, and the tax year you want the deduction in. We also ask how your CPA expects the loss to be used, so the deal size matches.
Offer Now Michigan buys and aggregates Michigan SFR portfolios as a principal. We present packaged portfolios with rent rolls, condition notes, and our underwriting.
You acquire the portfolio in a single transaction with clean title, tenants in place, and a placed-in-service date your CPA can plan around.
We introduce vetted cost segregation firms and Michigan property managers. They work for you directly; we do not take a fee from them.
Yes. The tax law signed July 4, 2025 restored 100% bonus depreciation on a permanent basis for qualifying property acquired and placed in service after January 19, 2025. Property under a binding contract signed before January 20, 2025 falls under the old phase-down schedule instead. Laws change, so confirm the current rule with your CPA before closing.
Used property qualifies as long as it is new to you and was not acquired from a related party. The portfolios we source are existing, tenanted single-family rentals.
Engineering-based studies on a residential portfolio typically run from the low thousands to around $10,000 depending on door count and documentation. Independent firms perform the study and defend it. We can introduce several; you engage them directly.
Depreciation reduces your basis, so more of the sale price is gain. Gain attributable to depreciation on the structure is taxed at up to 25%; gain attributable to the reclassified 5/7/15-year components is recaptured at ordinary rates. A 1031 exchange defers all of it into the next property, and suspended passive losses are released on a taxable sale.
An LLC is standard and does not change the tax result for a single owner or married couple. Retirement accounts are generally a poor fit for this strategy because the depreciation deduction has no value inside a tax-deferred account. Talk to your advisor before choosing the vehicle.
No. Offer Now Michigan is a principal real estate buyer and aggregator. Everything on this page is general education, not tax or legal advice. Your CPA or tax attorney determines what applies to you, and we are glad to join those conversations.
Tell us your target size, the tax year you are planning for, and how your CPA expects to use the deduction. We'll show you what we have and what we're sourcing.
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