What Building Owners Need to Know About the Phase Out of Bonus Depreciation Deductions

We’re only a few weeks into this tax season, and it’s clear that it’s going to be a messy one. The IRS has given a lot of frustrating mixed messages this year, from asking millions of people to wait to file their income taxes (only to backtrack days later) to vague guidance on various rule changes for the 2022 tax year. It’s a confusing start to a tax year that’s undergoing a bunch of modifications that will greatly impact real estate transactions for years to come. Fortunately, we’re here to help.

In 2023, and over the next few years, one big issue that filers will have to contend with, at least for U.S. federal income tax purposes, is the gradual phase out of the bonus depreciation deduction, an expedited tax deduction that enables business entities in several states to immediately write off a significant portion of the cost of qualifying assets (which often include newly-acquired properties, newly constructed properties, and the cost to rehabilitate said properties). 

Simply put, depreciation is a concept that allows a taxpayer to recover the cost of an asset (or “recognize a deduction,” as your CPA will phrase it) as the property declines in value of its useful life. Bonus depreciation is a special rule that allows a filer to accelerate the rate at which depreciation is recognized on qualified assets. It initially appeared in the tax code in 2002, when Congress passed a slew of initiatives intended to kickstart economic recovery after 9/11, and it became so

The post What Building Owners Need to Know About the Phase Out of Bonus Depreciation Deductions appeared first on Propmodo.

You May Also Like