Massive Tax Savings May Return: How 100% Bonus Depreciation Could Help You

Ready for a potential game-changer in real estate investing? Bonus depreciation—that supercharged tax deduction allowing investors to write off qualifying assets immediately instead of over many years—might be making a dramatic comeback.

The House has narrowly approved a bill that would restore 100% bonus depreciation for assets placed in service between January 2025 and December 2029. This represents a potential windfall for real estate investors, particularly those in commercial, manufacturing, and agricultural sectors. Imagine deducting the entire cost of qualified improvement property (QIP) like office renovations, HVAC upgrades, and retail store modernizations in a single tax year rather than spreading those deductions over decades. The financial implications are substantial: accelerated returns on investment, improved immediate cash flow, and the ability to undertake larger improvement projects that might otherwise seem financially daunting.

What makes this proposal particularly noteworthy is its "cliff edge" design—100% bonus depreciation through 2029, then abruptly dropping to zero on January 1, 2030. This structure will likely create strategic opportunities for forward-thinking investors who plan projects with this timeline in mind. Though the legislation still needs Senate approval and presidential signature, industry experts suggest it has significant momentum. For real estate professionals, understanding these potential changes now could position you to capitalize quickly if the provision becomes law. The window of opportunity may be limited, but for those prepared to act, the tax advantages could be extraordinary. Are you ready to rethink your investment and improvement strategies for the coming years?

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Episode Transcript

Speaker 1 (00:00):
OK, let's dive in.
We've got some reallyinteresting material today,
focusing on something that couldbe pretty significant for
anyone involved in real estate.

Speaker 2 (00:08):
Yeah, we're talking about the potential comeback of
100 percent bonus depreciation.

Speaker 1 (00:12):
Exactly.
Our sources are mainly newsreports covering this major tax
and policy bill that just gotthrough the House.
We're really zeroing in on thatbonus depreciation piece.

Speaker 2 (00:22):
We're really zeroing in on that bonus depreciation
piece, right, and our goal hereis to unpack what the shift
could mean.
You know what is 100 percentbonus depreciation in plain
terms?
Who really benefits and whyshould you, as an investor, be
paying attention?
So let's just hit the headlinefirst the US House did approve a
bill that might just bring back100 percent bonus depreciation.

(00:43):
Ok, and bonus depreciation ifthat sounds a bit like tax
jargon, let's simplify it.

Speaker 1 (00:46):
Please do.

Speaker 2 (00:47):
Think of it like well , a supercharged tax deduction.
Normally you write off the costof business assets over time,
right Little bits each year.

Speaker 1 (00:54):
Yeah, standard depreciation takes ages.

Speaker 2 (00:56):
Exactly Bonus depreciation less.
Businesses and investors deducta huge chump, maybe even the
entire cost of qualifying assets, right away In the year you
start using them.

Speaker 1 (01:08):
So give me an example , like if I own a rental
property.

Speaker 2 (01:10):
Perfect, say.
You put in I don't know,$20,000 worth of new appliances,
maybe a new HVAC system.
Okay, normally you deduct asmall fraction of that $20K each
year for several years.
Five, seven depends on theasset Right With 100% bonus
depreciation, boom, you couldpotentially deduct the full
$20,000 on this year's taxes.

Speaker 1 (01:30):
The whole thing in one go.

Speaker 2 (01:31):
Potentially yes.
That's a massive difference inyour immediate tax bill,
Significant cash flow impact.

Speaker 1 (01:37):
Okay, that definitely gets my attention.
And this isn't entirely new,right?
We had this before.

Speaker 2 (01:41):
That's right.
We had 100% bonus from the TaxCuts and Jobs Act, basically
from 2017 all the way through2022.

Speaker 1 (01:47):
But it was set to disappear.

Speaker 2 (01:48):
It was designed to phase out.
Gradually it dropped to 80percent in 2023.
It's at 60 percent right now in2024.

Speaker 1 (01:55):
And scheduled to go lower.

Speaker 2 (01:56):
Yeah, supposed to hit 40 percent next year, 2025, and
then keep dropping this newproposal.
It just resets the clockstraight back to 100%.

Speaker 1 (02:04):
OK, let's get into the weeds of this specific
proposal, the bill itself.
Well, it passed the House.

Speaker 2 (02:10):
You said it did pass very early on May 22nd, but it
was incredibly close to 15 to214.

Speaker 1 (02:17):
Wow, razor thin.
What does that tell us?

Speaker 2 (02:19):
Well, it tells us it wasn't exactly a bipartisan love
fest but crucially, it did passthat first hurdle.
Now it moves over to the Senate.

Speaker 1 (02:27):
And the Senate will likely want to make changes.

Speaker 2 (02:29):
Oh, almost certainly.
That's usually how it works,but the key provision we're
tracking the 100% bonusdepreciation part is
specifically proposed forqualifying property placed in
service after January 19th 2025.

Speaker 1 (02:41):
OK, so starting next year basically.

Speaker 2 (02:43):
Right, and it runs before January 1st 2030.
That five year window iscritical.

Speaker 1 (02:48):
And the fact it got through the House even narrowly
suggests it has a real shot.

Speaker 2 (02:52):
Absolutely.
It signals strong momentum.
There's a very decent chancethis provision, or something
very like it, ends up in thefinal legislation.

Speaker 1 (02:59):
So, assuming this goes through, who benefits the
most?
Is it all real estate equally?

Speaker 2 (03:07):
Well, technically, any qualifying real estate
investment could benefit fromfaster depreciation on some
assets, but the sources we'relooking at really highlight a
few sectors for potentiallygetting an exceptional boost.

Speaker 1 (03:19):
Which ones.

Speaker 2 (03:20):
Manufacturing agriculture and, interestingly,
certain types of commercialproperties.

Speaker 1 (03:25):
Why those specifically?
What's special there?

Speaker 2 (03:27):
Because the way this bill is structured, it seems
qualifying structures in thosespecific areas think a new
factory or a big farm buildingimprovement could potentially be
fully expensed right away.

Speaker 1 (03:38):
The whole structure, not just equipment inside.

Speaker 2 (03:41):
That seems to be the implication for those sectors
under this specific part of thebill.
Imagine deducting the cost of awhole new building up front.
That's a game changer for theirtax burden in year one Huge,
immediate relief.

Speaker 1 (03:53):
That is significant.
Ok, now the sources also talk alot about something called
qualified improvement property.
What's that?

Speaker 2 (03:59):
Right QIP.
This is super relevant for manycommercial property owners.
Qit is basically anyimprovement made to the interior
of a commercial non-residentialbuilding after the building
itself was first put intoservice.

Speaker 1 (04:12):
Okay, interior improvements.
What's not included?

Speaker 2 (04:15):
Good question.
It specifically excludes thingslike enlarging the building,
anything involving the internalstructural framework, elevators
or escalators.
It's really focused on theinside finishes and systems.

Speaker 1 (04:26):
So things like putting up new walls inside an
office or new lighting.

Speaker 2 (04:31):
Exactly.
The examples given are thingslike upgrading the HVAC,
modernizing office layouts, youknow, tearing down old offices
and building new ones, or doinga major interior renovation on a
retail store.
Common stuff for landlords.

Speaker 1 (04:44):
Got it.
So if this bill passes, howwould the 100% bonus
depreciation apply to those QIPprojects?

Speaker 2 (04:51):
This is where it gets really interesting for
commercial real estate.
The entire cost of thatqualified improvement property
could potentially be deducted inthe single year you finish the
project and place it in service.

Speaker 1 (05:00):
The entire cost of the renovation.

Speaker 2 (05:02):
If it qualifies as QIP and is completed within that
proposed window January 2025through December 2029, yes, so
finish a big office refit in,say, July 2026.
That whole cost couldpotentially offset your 2026
income.

Speaker 1 (05:17):
Wow, okay, that completely changes the economics
of doing major improvement.

Speaker 2 (05:21):
It really does.
The sources point to a coupleof major impacts.
First, obviously, it speeds upyour return on investment like
crazy.
You get the tax savings backimmediately, not dribbled out
over years.

Speaker 1 (05:31):
Shortens that payback period.

Speaker 2 (05:33):
Massively and second.
Those tax savings mean morecash in your pocket right now.

Speaker 1 (05:37):
Which you can then use for other things.

Speaker 2 (05:40):
Exactly, it frees up capital that would have been
tied up paying taxes.
You can reinvest it, maybe buyanother property, do more
improvements, expand yourbusiness.
It just makes your capital workharder, faster.

Speaker 1 (05:50):
And I guess it makes those really big, ambitious
renovation projects seem wellless daunting financially.

Speaker 2 (06:01):
Definitely.
A project that might look tooexpensive or take too long to
recoup costs under normaldepreciation rules suddenly
looks much more feasible if youcan expense most or all of it up
front.
It really encouragessignificant investment in
upgrading commercial interiors.

Speaker 1 (06:12):
Yeah, you mentioned that end date December 31st 2029
.
That sounds pretty final.

Speaker 2 (06:17):
It is and this is a really important point maybe one
of the most critical strategicelements here.
The proposal isn't for anothergradual phase out, like we saw
before.

Speaker 1 (06:25):
Nope 80 percent, 60 percent, 40 percent.
Step down this time.

Speaker 2 (06:28):
Nope.
According to this proposal,it's 100 percent through the end
of 2029 and then on January 1st2030, it drops straight to zero
.

Speaker 1 (06:36):
Zero, just off like a light switch.

Speaker 2 (06:38):
Exactly the sources call it a cliff edge expiration.
It's abrupt.

Speaker 1 (06:42):
What does that kind of hard stop usually do?

Speaker 2 (06:44):
Well, it could trigger a real scramble.
You might see a rush ofinvestment activity, especially
on bigger projects, as peopletry to get property placed in
service before that deadlinehits.
Everyone wants to lock in that100% deduction.

Speaker 1 (06:56):
So planning becomes absolutely crucial if you want
to take advantage.

Speaker 2 (06:59):
You have to.
If you're eyeing a majoracquisition that involves
significant depreciable assetsor a large QIP project, you need
to be really mindful of thattimeline.
You've got to get it completedand officially placed in service
sometime between early 2025 andthe end of 2029.
Timing is everything here.

Speaker 1 (07:17):
OK, so we've got this bill past.
The House has momentum, butit's not law yet.
What's the latest status?
What's the outlook?

Speaker 2 (07:25):
Like we said, it's now in the Senate's court.
They need to approve it, maybeafter making their own changes,
and then, of course, it needsthe president's signature to
become law.

Speaker 1 (07:34):
So hurdles remain.
But what's the general feeling?
Is this likely?

Speaker 2 (07:38):
The sense from the sources from industry chatter is
that the momentum is prettysolid.
This isn't some minor proposal.
It the sources from industrychatter is that the momentum is
pretty solid.
This isn't some minor proposal.
It's part of a big package.
Experts seem to think someversion of this bill, very
likely including this bonusdepreciation piece, has a good
chance of getting enacted.

Speaker 1 (07:53):
When might that happen?
Any guesses?

Speaker 2 (07:55):
Timelines are always tricky in DC, but some analysts
are pointing toward maybe latesummer as a possibility.

Speaker 1 (08:01):
OK, so not something you can bank on today, but
definitely something to watchvery, very closely.

Speaker 2 (08:06):
Absolutely.
The advice is clear Keep youreyes peeled as this moves
through the Senate.
Understanding the potentialrules and implications now means
you can be ready to movequickly, adjust your strategy
and really capitalize if 100percent bonus depreciation does
become reality again.
Being prepared is key.

Speaker 1 (08:28):
All right, let's just quickly sum up the main
opportunity here.
We're looking at the potentialreturn of 100% bonus
depreciation based on this HousePass bill.

Speaker 2 (08:32):
Which means potentially huge upfront tax
savings for qualifying realestate buys and, importantly,
for those interior improvementson commercial properties.
Qip.

Speaker 1 (08:43):
And the window for this, if enacted, would be for
property place in servicestarting early 2025, right
through the end of 2029.

Speaker 2 (08:50):
Correct.
Still needs Senate andpresidential approval, but it
cleared a big hurdle in theHouse, giving it real momentum.

Speaker 1 (08:56):
So definitely stay informed, watch how this
develops, because it could openup a significant, though
time-limited opportunity.

Speaker 2 (09:02):
And maybe a final thought for you to chew on,
especially thinking about thatcliff edge expiration, yeah.

Speaker 1 (09:08):
Consider how that hard stop at the end of 2029
might affect the market.
If everyone is rushing tofinish projects before the
deadline, could that drive upcosts for labor or materials?
Could it create bottlenecks?
How might that sharp cutoffinfluence your investment
decisions differently than if itwere just fading away slowly?
Something to factor into yourstrategic thinking.