With uncertainty in the economy, minds naturally gravitate toward ways to save money. For commercial real estate own- ers, this is a particularly crucial time to be aware of a few tax incentives that have the potential to lower your tax liability and improve the after- tax return on your investment.
2023 marks the beginning of a gradual decrease for real estate bonus depreciation. Therefore, before the year progresses further, now represents an excellent time to consider a cost segregation study to see if your property qualifies for enhanced depreciation deductions. It’s also an opportune moment to consider a “look back study” to determine if you can realize the benefits of a cost segregation study even after the year in which the property was purchased or constructed. Additionally, the Inflation Reduc- tion Act of 2022 (IRA) has introduced a higher energy tax deduction for commercial property owners that maybe worth consideration.
TAKE ADVANTAGE OF BONUS DEPRECIATION
Real estate has been and remains a tax favored asset class; one example is bonus depreciation. Bonus depreciation is an incentive that allows taxpayers to deduct a large percentage of the cost of qualifying property in the year it is placed in service (either by purchase or self-construction).
Qualifying property is property with a tax useful life of 20 years or less and includes items such as landscaping, furniture, wall and floor coverings, and many more assets that can be uncovered in a cost segregation study. The Tax Cut and Jobs Act of 2017 (TCJA) allowed for used property that is of original use to the taxpayer and that meets certain acquisition requirements to qualify for bonus depreciation as well.
The TCJA increased the first-year bonus depreciation from 50% to 100%, and that amount was available through the end of 2022. In 2023 this percentage is reduced to 80%. It will be 60% in 2024 and so on until it is set to be eliminated by 2027 (unless extended by Congress).
CONSIDER A…
Read the full article here
