YOU COULD BE LEAVING SIGNIFICANT CASH ON THE TABLE.
CONSEQUENCE #1 Missing Out on Immediate Cash Flow Benefits
One of the most compelling reasons not to miss out on bonus depreciation is its ability to generate immediate cash flow benefits and tax savings. Under this provision, eligible property assets, such as improvements made to a commercial property, can be depreciated at an accelerated rate, often as much as 80% in the year of acquisition. This means a substantial reduction in taxable income and a substantial boost to your bottom line. By not taking advantage of bonus depreciation, you could be leaving significant cash on the table. Every dollar saved in taxes can be reinvested into your real estate ventures, allowing you to expand your portfolio or enhance existing properties without compromising your cash flow. Keep in mind that bonus depreciation until 2023 was at 100% of the purchase price, so we’ve already lost out on 20% tax savings! What’s more, current legislation at the time of this article – which is subject to change – has bonus depreciation falling to 60% in 2024, 40% in 2025, and 20% in 2026 after which it will be completely phased out in 2027! It is important to note that the 20% that we lost this year and the other subsequent reductions in bonus depreciation is still claimed over the useful life of the property, just not all at once like it used to be. The bottom line: take advantage of bonus depreciation while you still can.
BONUS DEPRECIATION, PHASE-OUT SCHEDULE YEAR THE ASSET WAS PLACED IN SERVICE BONUS DEPRECIATION RATE
2022 2023 2024 2025 2026 2027
100% 80% 60% 40% 20% 0%
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