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Tax depreciation deductions have always been an essential aspect of real estate finance. Real estate owners can use tax depreciation to reduce taxable income while still generating positive cash flow. OBBBA permanently restores 100% bonus depreciation for qualified property placed in service after Jan. 19, 2025. This change allows owners and investors to fully deduct eligible improvement costs upfront, improving cash flow and long-term planning.
In structuring deals post-OBBBA, there is much to consider, not only from a tax depreciation perspective but from the interplay between tax depreciation and other changes under OBBBA, including the boost in Section 179 expensing with the deduction limit doubling to $2.5 million, the significant increase in the asset acquisition limit, and net operating loss (NOL) rules.
Counsel's role may include tax planning when representing investors in the acquisition, construction, and financing of commercial property including purchase price allocations and the timing of acquisitions. The changes brought by OBBBA require a proactive tax strategy that must take into account underwriting, cost recovery timelines, and project feasibility.
Listen as our authoritative panel discusses depreciation rules recently enacted under OBBBA, including what constitutes qualified property for bonus depreciation and how it might affect deal structure. The panel will also analyze the interplay of bonus depreciation with other key changes ushered in by OBBBA.