Bye Bye to the Bonus Depreciation Deduction

The tantalizing subject of tax deductions may not be dominating the conversation at your holiday party, but with 2022 drawing to a close, it’s important to remember that several changes will affect property organizations in this year’s tax returns. Real estate professionals only have a few weeks left to decide whether or not to claim the bonus depreciation deduction before it gradually begins to wind down forever.

One of the many benefits of investing in real estate is that the income stream is a vehicle for tax deductions. Owners and investors can write off costs that are directly related to the upkeep, management, and operation of a property. That’s because real estate presents a positive paradox: the value of a real estate investment generally increases over time, while the value of the building itself loses value. Foundations crack, HVAC systems putter out, plumbing systems rust, you get the idea. In the federal government’s eyes, all investment properties lose value every year, so the IRS permits the depreciation of that investment to be deducted from the taxable income that property yields each year. 

However, one of the key methods that owners and investors use to significantly reduce their tax burden is on its way out. Bonus depreciation, otherwise known as the Additional First Year Depreciation Deduction under Section 168(k) of the Internal Revenue Code, allows owners and investors the ability to deduct the entire cost of some capital improvements to a qualifying property. It often gets confused with Section 179, which allows a

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