Thanks to the 2017 Tax Cuts and Jobs Act (Trump Tax Plan) and the earlier PATH Act, you can get bonus depreciation of 100% (Yes! ALL of it!) for improvements made to your real estate but only after it has been put in service. There are some rules:
Property that qualifies for bonus depreciation (“qualified property”) now includes four additional categories:
- MACRS (modified accelerated cost recovery system – i.e., depreciable) property with a recovery period of 20 years or less,
- Computer software,
- Water utility property, and
- Qualified property improvement (to non-residential real property)
This last one is pretty new and important for real estate investors. The improvements must have been made after the property is put in service.
One more thing, there are 3 types of improvements that are excluded:
- Enlargement of the building,
- Adding an Elevator or escalator,
- Preforming work on internal structural framework.
You must put your property in service FIRST in order for these improvements to be eligible to receive the 100% bonus depreciation. In my blog yesterday (7/27/19), I talked about one client who had not properly reported the fact that his property was put in service. That little mistake cost him about $30,000 in taxes in the current year when he sold. Imagine how he felt when he learned he’d also missed out on this!
The moral of the story is that the more tax strategy you have before you make changes like starting a business or buying or selling real estate, the less tax you will pay. EVERY SINGLE TIME. And if you’re considering a consultation, I have saved clients an average of just over $14,000 for their $500 consultation investment.
Of course, your results may (and probably will) vary. Is a consultation right for you? Give Richard a call and tell him what you’ve got going on. We don’t want to take your money unless we can give you a return. That’s why EVERYONE must pre-qualify before I will do a consultation or take a new client.
Our goal is turn your tax preparation and accounting EXPENSE into an INVESTMENT. Expenses cost you money but investments give you a return.
Are you ready to make a change?