If you're an accredited investor, you are probably used to receiving multiple offers a week asking you to invest in some gizmo or widget or whatever.

Perhaps you're seeing a lot of talk about bonus depreciation ending in 2022.

Have you asked yet why syndicators keep talking about bonus depreciation?

In today's article, I'll cover some basics.

First, know that I am not a licensed CPA nor a qualified intermediary for taxes.

It is really important that you discuss the implications of bonus depreciation with your tax professional.


Let's start by recognizing one of the greatest benefits to investing in real estate. Depreciation. That's it. It's a magic IRS formula for "hiding" income legally.

That sounds terrible, but the reality is that the IRS and the government have a vested interest in people owning real estate.

It means that the population pays property taxes. Cities, counties, states, and the government all need tax revenue.

In 2017, the Congress passed the Tax Cuts and Jobs Act which applied to depreciable business assets.

This works for any type of business with assets that depreciate in less than 20 years as well as qualified property (including used property) placed in service after Sept 27, 2017.

​IRS FAQ - Additional First Year Depreciation Deduction (Click Here).

With the right accounting strategies including cost segregation and others, this 100% bonus depreciation can offset big gains as it has the potential on a multi-family investment to show a very large loss in year 1.

We have a couple of assets estimating 60-80% of the invested capital showing up as a loss in year 1. That can be significant when you have other gains to offset.

Dec 2022 is the last time this full 100% of bonus depreciation is available. The IRS is entering into a phase out over the next few years.

80% for property placed in service Jan 1, 2023 - Dec 31, 2023

60% for property placed in service Jan 1, 2024 - Dec 31, 2024

40% for property placed in service Jan 1, 2025 - Dec 31, 2025

20% for property placed in service Jan 1, 2026 - Dec 31, 2026

By 2027, the phase out will be complete and no more bonus depreciation will be offered. This is a big incentive to boost the economy and invest in businesses an infrastructure to keep the American economy humming along.

For investors, it creates a great pathway to save big money on taxes.

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