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Bonus Depreciation Increase

Mar 27, 2018

How to take advantage:

  • Increased to 100% until 2023, then phases down 20% per year after that
  • Applies to old property and used property


Ken Weissenberg:

One big thing is the bonus depreciation was increased to 100% until 2028 and then it phases down 20% a year after that. That applies not only to, two, old property, but three, it also applies to used property.

So, if you buy a building and you do a cost segregation study and part of that building is allocated to personal property associated with the building, you get to write that off in the year you buy it. That's a major change. A major bonus for real estate.

Section 199A Deduction

The section 199A deduction - whay it's important: 20% deduction on flow-through income including rental income and reduces tax rate on income from top bracket from 37% to 29.6%.

Provision for Losses Limit

Real Estate professionals can still deduct losses against income and losses now being limited to $500,000 per year are downsides to the Tax Act. If you're a real estate professional you get to deduct your losses against any other types of income.

Interest Deductibility

New limits impacting tax planning include deductions for interest limited to 30% of income before interest, taxes and depreciation and real Estate companies can elect out by lengthening depreciation for assets.

Rising Trends

What's on the Real Estate horizon due to the Tax Act? Transactions with REITs will be much more popular, as well as CAP A deductions, investment expense deductions and depreciation as a result of the tax act.

What's on Your Mind?

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Kenneth Weissenberg

Kenneth Weissenberg CPA, Tax Partner in Real Estate Services, is experienced in tax saving strategies and negotiating sales and acquisitions. He represents owners of some of the most well-known real estate properties in New York City.

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