Bonus Depreciation one of the best parts of RE Tax Code

[Melanie Baldridge]

Bonus depreciation is just a special part of the US tax code.

It allows you to take accelerated depreciation on portions of your property depending on when an asset is put into service.

At the time of this writing, you can write off a huge portion (60% in 2024) of many qualified components that have a useful lifespan of 15 years or less.

That means a certain percentage of things like landscaping, sidewalks, latches, appliances, fences, certain flooring, etc is depreciable in year 1.

The bonus depreciation rate percentage changes yearly depending on the administration and the tax code.

For years 2015 through 2017 first-year depreciation for all the items on a 15-year schedule or less was set to 50%.

It was scheduled to go down to 40% in 2018 and 30% in 2019 and then 0% in 2020.

But then Trump got elected, and he enacted the Tax Cuts and Jobs Act.

That moved the bonus depreciation percentage to 100% from 2017 to 2022.

In 2023 it went down to 80% and it’s currently at 60%.

Depending on who gets elected again, 100% may be back on the table.

Only time will tell.

We know that the US government wants to incentivize more development and ownership of RE.

They want Americans to continue to build and maintain our physical world.

That’s why real estate is one of the most tax-advantaged assets in the US.

Depreciation and bonus depreciation for RE are very positive and will likely continue in the years ahead.

[Account Closed]

Love this article, Melanie! Great breakdown of Bonus depreciation for RE. But the goodness doesn't stop there. Bonus deprecation can be used on equipment and vehicles too. This leads to the famous "g wagon write off" which a lot of our real estate brothers and sisters are interested in doing 

[Samantha P.]

In case anyone else is wondering about this, it's my understanding after doing a ton of research (but not having talked to a professional) that bonus depreciation only applies to properties in the US (not international properties). If someone could verify, that would be great. 

I'm wondering if cost seg can still be done just without taking the added bonus depreciation - it seems that perhaps it can. 

[Melanie Baldridge]

Quote from @Samantha P.:

In case anyone else is wondering about this, it's my understanding after doing a ton of research (but not having talked to a professional) that bonus depreciation only applies to properties in the US (not international properties). If someone could verify, that would be great. 

I'm wondering if cost seg can still be done just without taking the added bonus depreciation - it seems that perhaps it can. 

Yes, it's US only.

And yes, you can elect not to take the bonus depreciation you are eligible for after doing a cost seg.

[Samantha P.]

Oh just to clarify - I'm wondering if an international real estate purchase is eligible for cost seg, with the understanding that it couldn't also do bonus depreciation and that it has a different depreciation schedule. For the purpose of, say, minimizing capital gain in the same year. 

[Account Closed]

Quote from @Samantha P.:

Oh just to clarify - I'm wondering if an international real estate purchase is eligible for cost seg, with the understanding that it couldn't also do bonus depreciation and that it has a different depreciation schedule. For the purpose of, say, minimizing capital gain in the same year. 

 I dont think it is, @Melanie Baldridge feel free to jump in but foreign assets like this usually follow the tax code from that country. Not sure if there is a way around this 

[Melanie Baldridge]

Quote from @Account Closed:

Quote from @Samantha P.:

Oh just to clarify - I'm wondering if an international real estate purchase is eligible for cost seg, with the understanding that it couldn't also do bonus depreciation and that it has a different depreciation schedule. For the purpose of, say, minimizing capital gain in the same year. 

 I dont think it is, @Melanie Baldridge feel free to jump in but foreign assets like this usually follow the tax code from that country. Not sure if there is a way around this 

 Yes, exactly.