Bonus Depreciation

Upgrades like new HVAC systems, flooring, or lighting fixtures qualify for bonus depreciation. These improvements can generate substantial first-year deductions that immediately reduce your taxable income.

Improvements made to leased commercial properties qualify if they meet IRS criteria. Interior renovations, updated electrical systems, and space reconfigurations often fall into this category.

 While land itself doesn't qualify for depreciation, improvements to land do. Parking lots, landscaping, fencing, and outdoor lighting are all eligible for accelerated depreciation schedules.

 Under the Modified Accelerated Cost Recovery System (MACRS), assets must be physical property with a recovery period of 20 years or less. This includes machinery, equipment, furniture, and certain building components.

Tangible items with a useful life of 20 years or less qualify, including appliances, furniture, carpeting, and decorative fixtures.

Interior improvements to nonresidential property that's already in service qualify as QIP and are eligible for bonus depreciation.

Parking lots, sidewalks, landscaping, and fencing qualify for accelerated depreciation. The land itself doesn't qualify since land doesn't depreciate under IRS rules.

Single-family homes, apartment buildings, and multifamily properties contain numerous components that qualify for accelerated depreciation.

Office buildings, retail centers, warehouses, and industrial properties have many qualifying elements that can be separated from the building structure. 

Properties operated as short-term rentals benefit tremendously from bonus depreciation, especially when you meet material participation requirements.

Our team specializes in identifying eligible property through detailed cost segregation studies. We make sure every qualifying component is properly categorized to maximize your deductions.

The placed-in-service date determines which bonus depreciation rate applies to your property. An asset is considered placed in service when it's ready and available for its intended use.

The bonus depreciation rate that applies to your property depends on when it's placed in service and what federal tax law provides at that time. Your tax advisor can help you determine the exact rate for your situation.

The Internal Revenue Code limits the use of annual losses from rental activities. Even if a cost segregation study dramatically increases your depreciation deduction, you may not be able to use the full deduction immediately.

You can maximize benefits through several strategies:

• Offset income from other rental real estate assets
• Qualify as a Real Estate Professional for broader loss offsetting
• Use short-term rental material participation rules
• Carry forward unused losses to future tax years

Understanding how bonus depreciation applies to your investments allows you to make informed decisions. When evaluating properties, consider:

Property Type Selection - Target properties with higher percentages of qualifying components to maximize bonus depreciation benefits.

Renovation Potential - Look for properties where renovations and improvements can create additional bonus-eligible assets.

Multi-Year Tax Strategy - Develop long-term tax plans that leverage substantial deductions across your portfolio.

Income Management - Consider accelerating income in years with large bonus depreciation deductions to optimize your overall tax position.