Bonus Depreciation is Back

With the newly signed bill by President Donald Trump, bonus depreciation is back at 100% in 2025!

This allows for 100% tax write offs on qualifying property components that were placed into use after January 19, 2025. This is a massive win in the world of commercial real estate and a very enticing opportunity for investors to act on and could be a huge missed opportunity for investors who do not act on it..

Bonus depreciation allows investors to deduct the entire cost of eligible assets from their taxable income in the year that it was placed in service, rather than having it depreciate over multiple years. Some of these qualifying assets that are able to be deducted entirely are HVAC systems, fire alarms, carpeting, and other personal property that is part of the building.

The assets qualified for bonus depreciation can equal upwards of 30% of the entire building cost (not including the land) which in turn can lead to a huge write off for investors. For example, a $10 million building may have 20% of its value allocated to land which is non-depreciable. Of the remaining $8 million which is depreciable you could have close to $2.5 million dollars in eligible write offs in year one because of the newly reinstated bonus depreciation rules. That significantly reduces taxable income and, in turn, boosts your after-tax yield on the investment.

With bonus depreciation back in full force for the first time since 2022, investors have a rare opportunity to shield their income and increase their after tax returns on new acquisitions. Many investors are unaware of this change as it was one of a slew of new provisions buried in the Big Beautiful Bill. Smart investors won’t want to leave any money on the table by not taking advantage of this.

In conclusion, bonus depreciation is more than just a tax write off; it’s a major shot in the arm to real estate investors. Avison Young’s Net Lease Group has a tremendous amount of experience helping investors navigate bonus depreciation and myriad other tax strategies. Give us a call to learn more.