The Nick Huber Show
Ep 134: The 5 Levers of Bonus Depreciation
Feb 5, 2024
Learn about bonus depreciation, cost segregation, and 1031 exchanges for real estate investors. Discover the five levers of bonus depreciation and how it applies to different types of properties. Explore case studies of various asset classes and the factors that affect bonus depreciation.
09:29
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Quick takeaways
- The amount of bonus depreciation in real estate is influenced by the value of land, the percentage of property with a useful life of 15 years or under, leverage from the bank, tax rate, and year of implementation.
- Different asset classes have varying percentages of the purchase price eligible for bonus depreciation, such as 22% for a self-storage warehouse, 10.7% for an industrial portfolio, and approximately 46% for a short-term rental.
Deep dives
Tax Advantages in Real Estate
Real estate offers several tax advantages such as bonus depreciation, cost segregation, and 1031 exchanges. These strategies make real estate a highly tax-efficient business. The value of land versus improvement impacts the amount of bonus depreciation you can potentially claim. Areas with higher land values, such as Manhattan and Southern California, result in lower bonus depreciation. Additionally, the percentage of the property with a useful life of 15 years or under, the amount of leverage from the bank, the tax rate, and the year of implementation all play a role in determining the savings achieved through bonus depreciation.
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