What is Bonus Depreciation and How Can I Take Advantage in Today's Market?

What is Bonus Depreciation?

- Commercial assets can be depreciated over 39-years.
- Example:
  - Value of Building = $1,000,000
  - Annual Straight-line Depreciation = $1,000,000 / 39 Years = $25,641
  - Investor’s taxable income = $225,000 - $25,641 (Depreciation Expense) = $199,359
- Cost segregation studies, performed by engineers and/or certified public accountants (CPAs), can segment the building into improvements with faster depreciation schedules (5,7,15 years).

- A tax incentive allowing for the immediate deduction of a large portion of the purchase price for machine-intensive assets as opposed to writing them off over the asset’s “useful life”.
- Created by Congress via IRC §168(k) by the Tax Cuts and Jobs Act (TCJA) of 2017 to encourage small business investment and economy stimulation.
- The Bonus Depreciation provision allows a taxpayer to immediately deduct a certain percentage of the cost of qualifying property in the year the property is acquired, rather than capitalizing that cost and depreciating it over a period of years.
- Any property being depreciated can elect MACRS accounting and conduct a cost segregation study.

- 80% of the improvements can be expensed in the first year of ownership using a cost segregation study.
  - This can translate to 50% to 70% of the purchase price being expensed in Year One.
  - The phaseout schedule of bonus depreciation is as follows:
    - 2023 – 80% bonus depreciation
    - 2024 – 60% bonus depreciation
    - and so on until 2027
- Bonus depreciation = additional expense deductions = paying less tax = increasing investor’s cash flow

Assets Which Qualify for Bonus Depreciation

- Express washes are one of the top commercial product types in order to capitalize on bonus depreciation benefits. This is because it is one of the highest growth sectors of in the retail space, so investors get amazing credit behind the investment, a long term NNN lease with favorable increases & strong unit level performance. All of which combined with amazing tax benefits calls for a perfect long term investment strategy.
- All Car Washes placed in service after September 28, 2017, to December 31 2023 qualify for 80% Bonus Depreciation. This will go to 60% in 2024, 40% in 2025, 20% in 2025 and so on.
- Depreciation-motivated buyers are looking to Express Washes to offset capital gains or passive income on their Annual Tax Bill.

- Gas Stations and C-Stores can qualify for Bonus Depreciation
  - The building must meet the criteria for a “Retail Motor Fuel Outlet”:
  - 50% of gross revenues generated from petroleum sales
  - 50% of floor space devoted to petroleum marketing sales
  - C-store building is 1,400 Sq. Ft. or less
- In addition to prime locations and heavy traffic flow, Gas Stations are attractive to individual & institutional investors for this significant tax benefit along with investment grade credit tenants, long term leases and a growing retail sector.

RealSource Group has Multiple Bonus Depreciation Assets for Sale Which Fit This Requirement

Contact for Details

RealSource Group, Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

What is Bonus Depreciation and How Can I Take Advantage in Today’s Market?

What is Bonus Depreciation and How Can I Take Advantage in Today’s Market?

What is Bonus Depreciation?

Assets Which Qualify for Bonus Depreciation

RealSource Group has Multiple Bonus Depreciation Assets for Sale Which Fit This Requirement

Contact Real Source

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