What makes a property eligible for bonus depreciation?
What makes a property eligible for bonus depreciation? Can someone explain, thanks 🙏
[{"id": "iswel7i", "text": "Flippant answer, the U.S. Senate, as they draft the internal revenue code.  The better answer, that the property is qualifying property, under irc section 168k, which includes generally items with under 20 year depreciate class lives, and qualified improvement property.  Now when you buy a building, you probably have no idea about which of the various components fall into shorter class lives.  So you engage a firm to do a cost segregation study, ideally done by people with engineering backgeounds, and they will provide you and your tax pro a pretty report breaking it all down.", "replies": [{"id": "isxwysa", "text": "Can a cost segregation study be done anytime or does it have to happen shortly after purchase?", "replies": [{"id": "isy2jl1", "text": "Any time, but there are a number of cavets there, including whether or not it is worth it from a practical standpoint.  As how you change the return depends on how many annual returns have been filed (if it is an amendment or Form 3115), the laws in effect at that time, and the related calculations.\n\nIn addition, usually the report will include a tax classification amounts as well, in case you need to do a partial disposal latter on.  Example: You buy a warehouse for $2M, and the report has a tax value of $200k for the roof.  After 2 years, you need to replace the roof for $250k.  Without a partial disposal, you are stuck capitalizing the $250k.  With a partial disposal, you decrease your basis in the building by ($200k old roof cost less depreciation taken, say $10k), and this $190k is reported as a 1231 loss.\n\nAs well as there are varying levels of reports and related range of costs, ranging from robo providers (online only, they don't get copies of the blueprints) all the way to people that will come out, examine the property, have licensed engineers on staff, and will provide a large report, and related tax forms/amounts, based upon your cost.  You want to look for someone that has been in the business of doing cost seg reports for a while, has licensed professionals and provides some sort of audit guarantee/defense.", "replies": [{"id": "isyjnyw", "text": "This guy knows his stuff! How long have you been in the game?", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iswmt5d", "text": "If my memory serves me right, building improvements, not buildings themselves, are allowed to be bonus depreciated. However, according to a quick google search, looks like starting next year and ending 2026, bonus depreciation is being phased out on rental property.", "replies": [], "depth": 1}]