Bonus Depreciation and California Industrial Buildings

This is general information, not legal or tax advice. Please get legal and tax advice from your attorney, CPA and, for a 1031 exchange, your exchange accommodator before you decide.

The short answer

Federal law now lets many buyers deduct 100% of the cost of qualifying property in year one, for property placed in service after January 19, 2025. A building itself is not qualifying property. But a cost segregation study can reclassify parts of it, such as certain site work and interior improvements, into shorter lives that can qualify.

The California catch

California did not adopt the 2025 federal tax law, and it has long decoupled from federal bonus depreciation. A federal deduction often does not carry over to your California return, so your state and federal numbers can differ.

What to do before you buy

1. Ask your CPA how the deduction works on both your federal and California returns.
2. Ask whether a cost segregation study fits the size and price of the building.
3. Build the result into your owner-user or investor math, next to financing such as SBA 504 and any 1031 plan.

If you are weighing a purchase, request an opinion of value and I will help you run the property side.

Sources: Clark Schaefer Hackett, "Bonus Depreciation 2025 Becomes Permanent Under Big Beautiful Bill"; Wiss, "Bonus Depreciation 2026: A Guide for Real Estate Investors"; Grant Thornton, "California conformity date update excludes OBBBA" (Oct. 2025); KPMG, "California newly enacted law updates IRC conformity" (Oct. 2025).