As real estate investors head into their third tax season under the rule of the Tax Cuts and Jobs Act (TCJA), some are celebrating its extensive changes while others continue to hope for tax code corrections and extensions that may never come. To help plan for future investments, property owners should take a hard look at where the law has helped and where it still falls short.
100% Bonus Depreciation
This tax incentive, which increased from 50% to 100% starting in the 2017 tax season, is the most beneficial change for owners in years. It allows taxpayers to depreciate the full cost of qualifying property in the year it’s placed into service. Acquisitions as well as new construction projects now qualify for the deduction, which is a game changer for many. Acquisitions are now a more attractive investment option with immediate tax savings. The 100% bonus depreciation amount remains in effect until January 2023, then phases out with lower rates until ending in 2027. Score one for the TCJA . . . with significant limitations . . .