What Is Bonus Depreciation?

Unlock Immediate and Significant Tax Benefits for Investors

Bonus depreciation allows investors to deduct a large portion of a property's cost in the first year of ownership. For qualifying assets, 100% of the value can be written off immediately—improving cash flow and increasing ROI from day one.

How It Works

Real-World Example: $1M Airbnb Purchase Reimagined with this Tax Strategy

Imagine you buy a Airbnb in Florida for $1,000,000. After excluding $200,000 in land value, the remaining $800,000 can be depreciated. With cost segregation, portions of this total can be accelerated for maximum tax savings.

Discover investor Benefits

Bonus depreciation can be a valuable advantage for real estate buyers.

Upfront Tax Savings:

Reduce your first-year tax bill by as much as $55,500 (at a 37% tax rate).

Covers Setup Costs:

Offset initial expenses like decor, furnishings, and property upgrades.

Boosts Returns:

Increase your after-tax ROI by capturing early-year tax deductions.

Scalable Strategy:

Apply the same depreciation benefits across multiple real estate purchases.

Turnkey Appeal:

Make move-in-ready properties even more financially attractive to buyers.

Cost Segregation Breakdown

By performing a cost segregation study, the $800,000 depreciable is split into:

Personal Property

Allocated Value: $100,000

Depreciation Term: 5 Years

Bonus Eligible: Yes

Land Improvements

Allocated Value: $50,000

Depreciation Term: 15 Years

Bonus Eligible: Yes

Building Structure

Allocated Value: $650,000

Depreciation Term: 27.5 Years

Bonus Eligible: No

Things to Keep in Mind

Important Considerations Before You Invest

Bonus depreciation doesn’t affect a property’s sale price, but depreciation recapture may apply at sale—though a 1031 exchange can help defer those taxes. Also, since not all states follow federal bonus depreciation rules, it’s important to consult your CPA to understand your specific situation.

Get the full breakdown

Dive deeper into the bonus depreciation guide with a detailed, easy-to-reference PDF—perfect for real estate investors looking to maximize first-year tax savings.

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