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"bonus appreciation" in real estate
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"bonus appreciation" in real estate

梦想居士
楼主 (文学城)

The concept of "bonus appreciation" in commercial real estate gained significant attention following the Tax Cuts and Jobs Act (TCJA) of 2017. This legislation brought several changes to the U.S. tax code that impacted the commercial real estate sector, particularly through bonus depreciation rules. Here’s an overview:

### What is Bonus Depreciation?

Bonus depreciation allows businesses to immediately deduct a significant percentage of the purchase price of eligible assets, rather than spreading those deductions over the asset's useful life. This accelerated depreciation can significantly reduce taxable income in the year the asset is placed in service.

### Changes Introduced by the TCJA

1. **Increased Deduction Percentage**:
   - The TCJA increased the bonus depreciation percentage from 50% to 100% for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. This means that businesses could immediately deduct 100% of the cost of eligible assets in the year they were put into service.

2. **Expanded Eligibility**:
   - The definition of eligible property was expanded to include used property. Previously, bonus depreciation was only available for new property. This change significantly broadened the scope of assets that could qualify.

3. **Qualified Improvement Property (QIP)**:
   - The TCJA intended to include QIP (interior improvements to nonresidential buildings) as eligible for bonus depreciation. However, a drafting error initially excluded it. This was later corrected by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020, making QIP eligible for 100% bonus depreciation retroactively to January 1, 2018.

### Impact on Commercial Real Estate

1. **Immediate Write-Offs**:
   - Property owners and investors could immediately deduct a substantial portion of the cost of new or used assets, such as building improvements, furniture, fixtures, and equipment. This accelerated deduction could result in significant tax savings and improved cash flow in the early years of ownership.

2. **Increased Investment Activity**:
   - The immediate tax benefits provided an incentive for increased investment in commercial real estate properties and improvements. Investors could reinvest the tax savings into additional properties or improvements, potentially leading to greater economic activity within the sector.

3. **Strategic Planning**:
   - Real estate investors had to carefully plan the timing of acquisitions and improvements to maximize the benefits of bonus depreciation. This required coordination with tax professionals to ensure compliance and optimal tax outcomes.

4. **Impact of Phase-Out**:
   - The 100% bonus depreciation rate begins to phase out for property placed in service after December 31, 2022. The deduction percentage decreases by 20% each year until it is completely phased out by January 1, 2027. This impending phase-out could accelerate investment and improvement activities in the near term as investors seek to take advantage of the full deduction before it diminishes.

The bonus depreciation provisions introduced by the TCJA significantly enhanced the attractiveness of investing in commercial real estate by providing immediate tax benefits, which in turn could stimulate economic activity and growth within the sector.

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BrightLine
2 楼
要是没用到就不是好地主,避税没学好,房地产是一个大大的避税的shelter, 哈哈
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mobius
3 楼
这是不是电器,装修cost直接抵税,不用折旧?
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米奇的厨房
4 楼
去房坛看建宁的文章吧,他早就发文写过,写的很清楚
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绣球花开
5 楼
用过了 现在已经不能100%了吧 这个要商产做cost seregation 效果好

疫情期间为了用这个 我带2层口罩跟做cost seregation的人见面  还好口罩是管用的

再配上1031 exchange

 

 

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绣球花开
6 楼
他的文章我记得更偏民居 商产更划算
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梦想居士
7 楼
Yep, ends 2023
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米奇的厨房
8 楼
老朽JY他们的好是在告诉你可以现在做的,而不是他已经做完了,留给我们看着流口水的
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绣球花开
9 楼
当时加油站 汽修服务的可以write off a lot because their structures can be

当年搞定 正常商产是39年straight line 当然商产比民居的assigned depreciation basis value 要高一点

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梦想居士
10 楼
我不是房地产方面的专家, - 我还在学习, I asked ChatGPT, lol

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柠檬椰子汁
11 楼
"commercial real estate"
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螺丝螺帽
12 楼
你的回答看着容易理解啊, 赞一个
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