Tax
Bonus depreciation, without a borrowed rate.
Net-lease owners hear about bonus depreciation as if it were a yield. It is a tax-timing election. The property facts are ours. The tax answer belongs to your CPA.
01
It is a timing rule, not a discount
Depreciation spreads the tax basis of a building over its useful life. Bonus depreciation is an additional first-year deduction for qualifying property. It moves deductions forward; it does not make the basis disappear. The rate, the eligibility rules, and the placed-in-service date are set by statute. This page does not print a rate because the rate is not a market fact and it changes.
02
Cost segregation is the study that finds the short-life property
A building is not one asset for tax purposes. Land improvements, certain building components, and qualifying personal property can have shorter lives than the shell. A cost segregation study allocates basis among those categories. The study is an engineering and tax work product. It is not a broker opinion of value, and it does not change what the property is worth.
03
The deduction follows the basis, not the asking price
Basis depends on what was paid, what was allocated in the purchase agreement, and what was capitalized later. An asking price on a card is not basis. A broker’s pro forma is not basis. Your CPA and the closing statement are the file.
04
Recapture follows the deduction
Depreciation lowers basis. When the property is sold, some of the gain may be taxed as depreciation recapture rather than at the capital-gain rate that applies to the rest. A 1031 exchange can defer gain when the rules are met, but it does not erase recapture. State tax treatment can differ from federal treatment.
05
Passive-loss rules can decide whether you can use it
A deduction is only useful if it can be used in the year it is claimed. Passive activity loss rules, the real estate professional rules, and your other income can change that answer. The desk does not decide it. Your CPA does.
06
What this desk will and will not do
The desk can give your CPA the property facts it has: the offering, the lease, the rent schedule, the closing statement, and the capital expenditure history. The desk does not sell a tax strategy, does not prepare a cost segregation study, does not issue a tax opinion, and does not promise a deduction. Those are separate professional engagements.
What to give your CPA
- The closing statement and the purchase price allocation.
- The lease and the rent schedule.
- Capital expenditures and any prior depreciation schedule.
- Whether the property is held for investment, used in a business, or both.
- The exit plan, including whether a 1031 exchange is contemplated.
This page is an explanation, not tax, legal, or investment advice. No rate, percentage, or deduction is stated or promised here. The statute, the placed-in-service date, your basis, and your facts control. Confirm all of it with your CPA and, where needed, tax counsel.