What to Know About Real Estate Depreciation Strategies and Relevant Legislation Updates

December 14, 2022

On December 22, 2017, the Tax Cuts and Jobs Act (TCJA)—the most sweeping tax reform since 1986—was signed into law.  The TCJA has had a tremendous impact on all industries, including commercial real estate. In March of 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was passed, including several provisions that impacted the treatment of depreciable assets. In August of 2022, the Inflation Reduction Act (IRA) was signed into law, bringing major changes to energy-efficiency tax incentives. This article will examine the effects of these tax reforms and subsequent legislation on bonus depreciation and related incentives.

Bonus Depreciation

Bonus depreciation was introduced by Congress in 2001, in an attempt to stimulate the economy following the attacks of September 11. Bonus depreciation is a tax incentive that permits owners of qualified property (th

at is, property with a recovery period of 20-years or less) to immediately deduct a percentage of the asset’s depreciable basis. Personal property and land improvements are eligible for bonus, though building core and shell assets are not.

The PATH Act (Protecting Americans from Tax Hikes) legislation was in effect prior to the TCJA. The TCJA made two very significant changes to the bonus depreciation rules established under the PATH Act:

  • The TCJA set bonus depreciation at 100% for qualified property placed-in-service between September 28, 2017, and December 31, 2022. After 2022, bonus depreciation rates gradually decline, as illustrated in the bonus depreciation table below.
  • Bonus-eligible property now includes new construction, renovations, and acquisitions. Since its inception, bonus depreciation has historically only been available for new construction and renovation projects. By including acquisitions among bonus-eligible property types, the TCJA has piqued the interest of investors focused on accelerated depreciation.

Bonus Depreciation Table

Year Dates Post-TCJA Bonus
2017 1/1/2017 – 12/31/2017 Acquisition

Written binding contract (WBC) signed before 9/28/17: NONE

WBC signed after 9/27/17: 100%

   

New Construction/Renovation

Substantial construction begun before 9/28/17: 50%

Substantial construction begun after 9/27/17: 100%

2018 1/1/2018 – 12/31/2018 Acquisition

WBC signed before 9/28/17: NONE

WBC signed after 9/27/17: 100%

   

New Construction/Renovation

Substantial construction begun before 9/28/17: 40%

Substantial construction begun after 9/27/17: 100%

2019 1/1/2019 – 12/31/2019 Acquisition

WBC signed before 9/28/17: NONE

WBC signed after 9/27/17: 100%

    New Construction/Renovation

Substantial construction begun before 9/28/17: 30%

 

Substantial construction begun after 9/27/17: 100%

2020 1/1/2020 – 12/31/2020 N/A 100%
2021 1/1/2021 – 12/31/2021 N/A 100%
2022 1/1/2022 – 12/31/2022 N/A 100%
2023 1/1/2023 – 12/31/2023 N/A 80%
2024 1/1/2024 – 12/31/2024 N/A 60%
2025 1/1/2024 – 12/31/2024 N/A 40%
2026 1/1/2026 – 12/31/2026 N/A 20%

Scope of Potential Savings

Cost Segregation is an engineering-based analysis in which fixed assets are isolated and reclassified into shorter-lived tax categories, resulting in accelerated depreciation, tax deferral, and increased cash flow. A study may be performed throughout the real estate life cycle on acquired, renovated, or newly constructed properties. Many studies are commissioned when properties are initially placed-in-service, but the IRS also permits “look-back” studies. These studies allow taxpayers to retroactively claim all the depreciation that they would have received had they performed a study when the property was originally placed-in-service.

The nuances within the TCJA have further expanded the utility of a cost segregation study. These engineering-based studies have long provided  owners with the documentation and support needed to accelerate properties into smaller-lived asset categories and capture bonus depreciation.

Prior to the TCJA, a cost segregation study on a smaller property might not have provided a sufficient return on investment. With acquisitions eligible for 100% bonus under the TCJA, smaller-basis properties have become good candidates for cost segregation. Consider a small neighborhood shopping center, acquired with a depreciable basis of $1.5M. Engineers were able to move 13% to 5-year depreciation and 10% to a 15-year timeline.  Note that post-TCJA it is well worth performing a $6,000 study, whereas pre-TCJA a study may not have been warranted.

  Pre-TCJA Post-TCJA
Additional Cash Flow (Year 1) $13,151 $116,432
10-Year Net Present Value $67,147 $93,675

The fee for a cost segregation study of this type would be in the range of $6,000.

Investors in larger-scale projects are seeing commensurate larger-scale savings. Consider the new construction of a multifamily garden-style apartment complex with a depreciable basis of $5M. In a cost segregation study, 15% of assets were moved into 5-year class life, and another 10% moved into 15-year class life. The impact of 100% bonus depreciation under the TCJA was quite significant.  

  Pre-TCJA Post-TCJA
Additional first-year cash flow $160,994 $421,359
10-year Net Present Value $240,919 $304,430

The fee for a cost segregation study of this type would range between $7,000-$8,000.

Finally consider a very large project, a high-rise office building with 23 tenants and a 5-story parking structure. The building’s depreciable basis was $24,570,386 and engineers moved 9.5% into 5-year class life and 0.3% into 15-year class life.

  Pre-TCJA Post-TCJA
Additional first-year cash flow $149,598 $788,932
10-year Net Present Value $579,323 $640,924

The fee for a cost segregation study of this type would range between $12,000-$15,000.

One caveat -- the above examples are present value calculations and do not consider depreciation recapture. Depreciation recapture will not come into play until the property is eventually sold. The gain on sale will be increased as the asset’s tax basis is reduced by the depreciation taken. Part of the gain will be taxed at the favorable capital gain rates, 15% or 20%. The gain that is attributable to the depreciation taken will be “recaptured” and taxed at less favorable rates, 25% or up to 37% of ordinary rates. It’s important to consult a tax advisor knowledgeable in depreciation recapture when determining hold strategy.

Declining Bonus Rates

The properties above were all placed in service between 2018-2022, and as such 100% bonus was in play. However, as illustrated in the above bonus depreciation table, bonus rates will begin to decline by 20% a year starting in 2023, and eventually sunset December 31, 2026.

Moving forward, project timing will be key. It is crucial to keep bonus depreciation in mind when planning closings on acquisitions, scheduling renovation and construction projects, and keeping projects on track. If an opportunity to acquire a property arises at year end, keep bonus depreciation in mind and try to avoid crossing into the new tax year. If your client can manage to close at year end, the bonus depreciation rate will be 20% higher. The same goes for new construction and renovations. When possible, encourage your clients to try for at least a temporary certificate of occupancy by year end. It may be helpful to clearly communicate the message to contractors early in the process — completing the project before year end is very important for financial reasons. 

Consider an example. Property ABC, a garden apartment complex, was acquired and placed in service in September of 2018 with a total depreciable basis of $37,445,200. Engineers were able to move 18.7% of assets into 5-year personal property, and another 7% of assets into 15-year land improvements. When 100% bonus is in play, this results in a first-year tax savings of $3,142,872.       

Year

Bonus Rate

First Year Tax Savings

2018-2022

100%

$3,142,872

2023

80%

$2,608,664

2024

60%

$2,074,555

2025

40%

$1,540,246

2026

20%

$1,006,038

The table above demonstrates the impact of declining bonus rates over time on property ABC.  Cost segregation studies will still bring great benefit, even with lower bonus rates, but it’s important to be aware that the 100% bonus rate only runs through the end of 2022. Many in the industry are hopeful that bonus will continue to be extended by Congress as we have seen since 2001. In the meantime, think strategically about project timing.

Qualified Improvement Property (QIP)

The CARES Act had a tremendous impact on one particular asset category, Qualified Improvement Property (QIP). QIP is defined as any improvement to an interior portion of a building which is nonresidential real property if the improvement is placed in service after the date the building was first placed in service by any taxpayer.

There are several noteworthy details within this definition. First, QIP focuses on interior work performed on an existing building. So, newly constructed buildings are not eligible for QIP treatment. Additionally, if a newly constructed building is owner-occupied and the building and improvements are placed in service simultaneously, those improvements are not eligible for QIP. However, if the core and shell is placed-in-service by the owner, and at some later time tenants lease space in the building, the amount paid for those tenant improvements would be eligible for QIP.

Second, the definition refers to non-residential property, meaning that residential properties are excluded. If a client owns a mixed-use building, an income test is required to determine if the building is depreciated as residential property (27.5-year class life) or longer-lived commercial property (39-year class life). If less than 80% of the building’s income comes from residential sources, then the building is considered commercial property and appropriate improvements would in fact be eligible for QIP.

Next, the definition clearly excludes work done to elevators and escalators, as well as work that enlarges a building or work done on structural building members. These assets would retain their 39-year class lives.

Finally, the definition indicates that only real property is eligible for QIP.  Real property is defined under Section 1250 as traditional 39-year assets. As such, assets defined as personal property under Section 1245, would be excluded from QIP eligibility. There are still benefits to be had from this personal property though – they would be carved out separately in a cost segregation study and would be eligible for accelerated depreciation and bonus treatment.

The TCJA contained an unfortunate drafting error which was corrected by the CARES Act. Under the CARES Act, QIP placed in service on or after 1/1/2018 is assigned a recovery period of 15-years, making it eligible for bonus depreciation. The change was retroactive, allowing taxpayers to revisit pre-existing cost segregation studies via a 3115 and get even more value. (A planning note for CPAs — remember that if 163(j) is elected to elect out of the interest deduction limitation, QIP will be assigned an ADS life of 20-years and become ineligible for bonus.)

How significant is bonus-eligible QIP? Consider a newly constructed commercial office fit-out with a depreciable basis of $870,519. The suite includes private offices, cubicle areas, conference rooms, a server area, and an entry lobby. The fit-out was completed and placed-in-service in February of 2018. The cost segregation study was revisited after the CARES Act to incorporate bonus-eligible QIP. The impact of this change is summarized in the table below.

  Pre-CARES Act Post-CARES Act
% to 5-year 28.6% 28.6%
% to 15-year 0.3% 0.3%
% to 15-year QIP -- 69.9%
First-year tax savings $98,371 $336,229

Tangible Property Regulations (TPR) and Partial Asset Disposition (PAD)

Released in 2014, the Tangible Property Regulations (TPRs) guide taxpayers through an important decision-making process – which asset costs must be capitalized, and which may be expensed? The TPRs established three Safe Harbors – Routine Maintenance, Small Taxpayer, and De Minimus – that may permit the full expensing of an asset. If an expenditure doesn’t meet the criteria required for a Safe Harbor, the BAR and Materiality tests should be performed to determine if the cost represents a significant improvement that must be capitalized. 

Even if it is determined that the expenditure must be capitalized, the TPRs still provide a great opportunity for write-offs. The final regulations permit an election to recognize Partial Asset Disposition (PAD). This election has tremendous implications for tax savings.

Before the regulations took effect, there were no written instructions regarding writing off the remaining depreciable basis of pre-existing assets.  Before the TPRs, if a client needed to replace a roof he would capitalize the cost of the new roof, and then depreciate it over the usual class life (39-year for commercial property.) Most taxpayers would also continue depreciating the old roof which had been replaced. It wasn’t that unusual to see two or more roofs on the books simultaneously.

Fortunately, the TPRs allow for the immediate write-off of the remaining depreciable basis of the old roof, recognizing a loss in that amount. This results in lower total income, lower taxable income, and decreased tax burden immediately. This may also benefit the taxpayer if he sells the property in future. In a sale, accumulated depreciation often gets recaptured, meaning that some of the proceeds from the sale get taxed at higher rates. Partial asset disposition removes accumulated depreciation from the fixed asset schedule. By reducing amounts to be recaptured, the disposition election in essence establishes a tax rate arbitrage, allowing taxpayers to use normal capital gains treatment under Sec. 1250.

An additional bonus of the PAD election comes in the form of deductible removal costs. It costs money to remove all those old shingles and any bad wood. The TPRs allow for the deduction of these costs on top of the deduction of the remaining depreciable basis of the old roof. Note that removal costs related to demolition are covered under Sec. 280B and are addressed differently.

Section 179 Expensing

Section 179 is an entity-level election for trade or business that permits the full purchase price of eligible assets to be written off in the year of purchase. It has been effect since 1958 and has long encouraged businesses to invest in themselves.  

The TCJA expanded the scope of Section 179-eligible assets to include the following improvements to nonresidential building systems placed in service after the building was placed in service: Qualified Improvement Property, roofs, HVAC, fire protection and alarm systems, and security systems. This opened up a new expensing strategy for commercial real estate owners, particularly as the dollar limitation of the election was boosted from $510K to $1,000,000 ($1,080,000 for TY 2022). New and acquired assets are eligible for expensing under Section 179.

When the bonus depreciation rate is set at 100%, it seemed essentially equivalent to Section 179 expensing. But with bonus rates soon to decline, Section 179 expensing may play a larger role in tax plans going forward, as only Section 179 expensing will continue to permit the immediate expense of 100% of the asset cost.

It’s important to note some major differences in these strategies – though they might seem equivalent, they are not. These points are also summarized in the table below.

  • Bonus depreciation permits the deduction of a percentage of a cost while Section 179 permits expensing up to a set dollar amount. The 2022 Section 179 deduction limit is $1,080,000.
  • Section 179 expensing can only be taken on a trade or business, so it won’t apply to every real estate situation. When Section 179 can be used, it is applied to each asset individually. If you bought 30 computers this year, you may choose to expense only five of those machines using Section 179 expensing. Bonus depreciation doesn’t give you that flexibility. For the purchase of computers, unless you elect out of bonus for that property class, you take bonus on alleligible computers. In fact, you would take bonus on all the assets in that asset class.
  • The immediate benefit of Section 179 expensing is generally limited to profitable entities. Bonus depreciation has no such restriction and may be taken if your business was not profitable in a given year. Any unused 179 expenses may be carried forward.

Taxpayers need to consider any potential state limitations on Section 179 expensing. The limit provided above is based on federal guidelines, but many states have established their own parameters for 179 expensing, and some states don’t recognize it at all. Many states also don’t recognize the aggressive bonus depreciation available at the federal level. It’s important to consider the impact of state-specific legislation when comparing Section 179 expensing and bonus depreciation.

Section 179 Expensing and Bonus Depreciation: How Do They Compare?

  Section 179 Expensing

Bonus Depreciation

Applies to New Assets
Applies to Used Assets
Applies to Personal Property
Represents 100% Expensing of Asset ✔(through 2022)
Applies to Qualified Improvement Property
Applies to Commercial Roofs, HVAC, Fire Protection, Security Systems

 
May Use to Take an Overall Tax Loss  
Requires an Affirmative Election Made in the Year the Asset is Placed-in-Service  
Can Be Used Retroactively Through CSS Look-Back Study
 
Permits Related-Party Acquisitions   ✔*
Associated Expensing Limit (2022 -- $1.08M)  
Associated Phase Out (2022 -- $2.7M)  

*May not apply on “used” property acquired from related parties.                                                                                           

Deciding when and how to approach expensing can be challenging. In general, we advise that taxpayers first leverage the TPRs, and expense what they can using BAR and materiality testing, or one of the TPR’s safe harbors. We then suggest considering what assets might be eligible for expensing under Section 179, and finally recommend the use of accelerated depreciation, bonus depreciation, etc. to get the most tax savings out of the basis that remains. This is a general guideline and may not apply to every set of facts and circumstances, but it’s a useful framework. Consider the two examples below, each set in Pennsylvania.

In 2021, Taxpayer A did a major HVAC replacement in his Pennsylvania manufacturing facility, at a cost of $100,000. For federal purposes, he can claim the entire $100,000 as a federal 179 expense. Since he is in Pennsylvania, which currently limits 179 expensing to $25,000, he will also be able to claim a $25,000 immediate state 179 expense, resulting in a remaining basis of $75,000. This must be capitalized at a full 39-year MACRS life and is not eligible for bonus depreciation. Taxpayer A might be able to write off the remaining depreciable basis of the retired HVAC system as a partial disposition election.

Taxpayer B is also in Pennsylvania and he just completed an interior fit-out of an office building used for his operating company. Again, the total cost was $100,000. Under the TPRs, $50,000 of the fit-out may be expensed as they do not rise to the level of being a betterment to the space. The remaining $50,000 can be expensed as a 179 expense or eligible for bonus at a 100% or reduced future rate since the property would be Qualified Improvement Property (QIP). For Pennsylvania purposes, the taxpayer can claim the $50,000 expense using the TPRs and $25,000 of 179 expense. The remaining $25,000 would most likely be a 15-year depreciable life for Pennsylvania. Note that in this example, for state purposes bonus would not apply. Absent using Section 179 expensing, the taxpayer would have a $50,000 Pennsylvania asset, most likely, recovering over a 15-year life.

MACRS vs. ADS

MACRS, or Modified Accelerated Cost Recovery System, is the IRS-approved method used by businesses that wish to accelerate depreciation on business equipment. MACRS provides an asset classification system delineating the number of years of depreciation associated with each type of asset.

Within MACRS are two depreciation systems: the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Entities using the ADS method are NOT able to take advantage of Bonus depreciation.

Interest Deduction Limitation

The Interest Deduction Limitation under the TCJA may impact bonus eligibility. Effective 1/1/2018, this provision subjects companies to a limitation on deductible business interest expense. Under the CARES Act, the deductible amount is capped at 50% of adjusted taxable income after certain adjustments.[1] Generally, if a firm’s three-year average annual gross receipts are $26 million or less yearly, it is completely exempt from the deduction limitation, and may fully deduct their business interest as an expense.

In addition, taxpayers who fall into one of the following categories may be able to elect out of the limitation: real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing or brokerage trade or business. If a taxpayer chooses to elect out of the 163(j) limitation, real property must be depreciated using ADS (Alternative Depreciation System) as follows:

  • Residential real property assets are 30-year straight line
  • Nonresidential real property assets are 40-year straight line
  • Qualified Improvement Property is 20-year straight line

Again, bonus-eligible property must have a recovery period of 20-years or less. As such, irrevocably electing out of the Interest Deduction Limitation means that above assets, mainly qualified improvement property, will not be eligible for Bonus depreciation. The implications of this decision warrant careful consideration.

However, additional new legislation means that this decision need not be set in stone. Rev. Proc 2020-22, passed in April 2020, permits revocations of elections out of 163(j) made on 2018 or 2019 tax returns and allows late elections out of 163(j) back to 2018. Now that QIP is eligible for 100% bonus depreciation under the TCJA, many taxpayers who initially chose to opt-out of 163(j) are starting to rethink that decision and are using this as a valuable opportunity to opt-in if desired.   

EPAct 179D under the Inflation Reduction Act

Created as part of the Energy Policy Act of 2005, the EPAct 179D tax deduction was made permanent by the Consolidated Appropriations Act of 2021 (CAA). The federal deduction may be applied to ground-up energy-efficient construction projects as well as to energy-efficient retrofits. 179D applies to all types of energy-efficient commercial buildings (EECB) and to residential rental buildings that are a minimum of four stories high.

Clauses in the IRA will increase and expand the utility of 179D as follows:

  • Lowers the minimum EECB efficiency standard required to qualify.  Under the IRA, taxpayers must demonstrate a 25% reduction in total annual energy and power costs relative to benchmark.  Under the old law, taxpayers had to demonstrate a 50% reduction in costs relative to benchmark.  These new standards will make it easier for taxpayers to achieve the 179D deduction moving forward.  
  • Increases the maximum potential deduction to $5.00/SF.  The deduction is determined using an “Applicable Dollar Value” (ADV) multiplication factor. The initial value and eventual cap of the ADV varies depending on whether prevailing wage and apprenticeship requirements2 are satisfied. 
  • Changes to ASHRAE standards used for benchmarking. The reference standard to be used moving forward is the most recent ASHRAE standard published in the 4 years before the property was placed-in-service.
  • Allows the EPAct 179D deduction to be taken by designers, architects, and engineers of building projects for tax-exempt entities, including religious and charitable organizations, private schools, Native American tribal governments, and various non-profits.  Previously, the deduction could only be taken by designers of energy-efficient government-owned or leased building projects. 
  • Establishes an Alternative Deduction Election for Energy Retrofit Projects Retrofits can now qualify by showing at least a 25% decrease in “Energy Use Intensity” as compared to the building pre-retrofit. A qualified retrofit plan is required, and the election must be taken in the year of final qualifying certification.  The property must have been placed-in-service at least five years before the establishment of the qualified retrofit plan. The relative simplicity of this Alternative Deduction Election should encourage energy retrofits and result in great 179D benefit.
  • Permits deduction reset: The deduction may now be taken every 3 years on a commercial building, and every 4 years on a building owned by a tax-exempt entity.  In the past, a property owner was permitted to take the 179D deduction once. This will be very beneficial on long-term multi-phase energy upgrade projects.

As mentioned above, 25% is the new minimum energy reduction threshold that must be met to qualify for the deduction. The ADV will reward taxpayers who exceed this minimum threshold up to a certain cap.

  Requirements are
Satisfied
Requirements are
NOT Satisfied
Minimum initial Value of ADV $2.50/SF $.50/SF
For Every 1% Point of Energy Reduction Beyond 25% Threshold, the ADV will Increase by $.10 $.02
Maximum Value of ADV $5.00/SF $1.00/SF

 

  Requirements are
Satisfied
Requirements are
NOT Satisfied
Minimum Initial Value of ADV $2.50/SF $.50/SF
For Every 1% Point of Energy Reduction Beyond 25% Threshold, the ADV will Increase by $.10 $.02
Maximum Vlaue of ADV $5.00/SF $1.00/SF

The previous maximum deduction was $1.80/SF, increased to $1.88/SF in 2022 due to inflation. This was derived from a maximum of $.63/SF from each of three focus areas – HVAC, lighting, and building envelope. (If taxpayers could not fully demonstrate savings in all three categories, they could claim a partial deduction. Partial deductions are no longer permissible under the IRA. The legacy 179D interim lighting rule has also been eliminated.)

Placed-In-Service Date Legislative Act ASHRAE Standard
2006-12/21/2015 EPAct 2005 90.1.2001
2016-12/21/2020 Annual Tax Extenders Package 90.1.2007
2021-12/21/2022 CAA 2021 Most recent version published in the 2 years before the property was placed-in-service, currently 90.1.2007
2023-present
IRA 2022
Most recent verison published in the 4 years before the property was placed-in-service

It’s important to note that the total deduction is still dependent on building size. Whether you are working under the old or new laws, large buildings will consistently generate the greatest 179D benefit.

2 Prevailing wage requirements. Under the prevailing wage requirements, for any qualified residence, the taxpayer must ensure that any laborers and mechanics employed by the taxpayer or any contractors and subcontractor or subcontractor in the construction of the residence are paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which the residence is located as most recently determined by the Secretary of Labor.

45L Tax Credit Under the Inflation Reduction Act

The 45L Tax Credit is a one-time federal tax credit that promotes the construction of energy efficient residential dwellings. The credit is available to builders, developers and others who build homes for sale or lease, and credit is allocated per “dwelling unit.” The 45L Tax Credit was not extended by the Consolidated Appropriations Act.  

For projects placed in service in 2022 

The IRA retroactively extended the 45L Tax Credit for properties placed-in-service through 2022. For projects placed-in-service in 2022, the $2,000 credit per dwelling unit and the existing qualification criteria will remain unchanged.  Residential rental property no more than 3 stories above grade are eligible for the Credit.  

For projects placed in service in 2023-2032 

The IRA also extends the 45L Tax Credit moving forward for projects placed-in-service from 1/1/2023-12/31/2032. For projects placed-in-service in 2023 and beyond, several major changes will go into effect:

The energy efficiency requirements will change from “50% better than the 2006 IECC energy code” to Energy Star and Zero Energy Ready (ZER) Home standards.   Energy Star and Zero Energy Ready Home programs don’t include a height requirement for qualification. Residential projects of any size may be eligible for the 45L Tax Credit under the IRA.   Section 42 Low Income Housing Tax Credit (LIHTC) projects will NOT need to take the 45L credit into account when determining adjusted basis of a property for LIHTC Credits.  The maximum tax credit will increase to up to $5,000/dwelling unit. See table below. 

Home Type

$500 Credit

$1,000 Credit

$2,500 Credit

$5,000 Credit

Single-Family Home Acquired Before 1/1/2025

N/A

N/A

Energy Star v3.1 + Regional Energy Star Requirements (1)

DOE ZERH

Single-Family Home Acquired On/After 1/1/2025

N/A

N/A

Energy Star v3.2 + Regional Energy Star Requirements (1)

DOE ZERH

Manufactured Home

N/A

N/A

Energy Star Manufactured Standard (1)

N/A

Multi-Family Home

Energy Star MF NC

DOE ZERH

Energy Star MF NC (1) + Prevailing Wage

DOE ZERH + Prevailing Wage

Conclusion

The TCJA, CARES Act, and IRA will continue to have significant impact on real estate owners in the coming years. This legislation has created a myriad of opportunities for tax savings. Having a sound cost segregation study performed on any renovation, new construction, or acquisition will allow the owner of real estate to fully take advantage of bonus depreciation. In addition, it cannot be overstated that seeking advice from CPAs well versed in real estate matters is more important than ever. Partnering with qualified advisors will ensure that the real estate owner is fully aware of the role of bonus depreciation and related as incentives as part of a comprehensive overall tax strategy.


[1] Different rates apply to partnerships and “S” Corporations in 2019.

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