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Real Estate Acquisitions: Maximizing Expensing and Depreciation Deductions

Repairs vs. Improvements, Bonus Depreciation vs. Section 179, Tangible Repair Regulations, Safe Harbors

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, October 29, 2024

Recorded event now available

or call 1-800-926-7926

This webinar will discuss strategies to accelerate deductions for real estate improvements. Our expert panel of real estate tax professionals will break down the complex guidelines surrounding these purchases including the tangible repair regulations, available safe harbors, and expensing elections. They will provide tips on expensing common purchases, including HVACs, roofs, land improvements, and other frequent outlays made by real estate operations.

Description

Purchasing and maintaining real estate, including residential and nonresidential properties, can be a lucrative but expensive endeavor. Distinguishing capital improvements from deductible repairs is a critical determination. The former must be depreciated over 39 or 27.5 years, while the latter is immediately deductible. The tangible property regulations provide rules determining when purchases are considered betterments, restorations, or adaptations of a unit of property and hence capitalized. These regulations also provide valuable safe harbors, including one for purchases of materials and supplies that allows immediate expensing of items costing $2500 or less and consumed within a year and a safe harbor for routine maintenance costs.

Perhaps more valuable are bonus depreciation and Section 179 deductions. Although similar, both allow an immediate write-off of some or all of current-year purchase costs; the parameters for these deductions vary distinctly. Bonus depreciation is calculated as a percentage; 100 percent of a qualifying purchase was deductible in 2022. This percentage, 60 percent for 2024, is being phased out under TCJA and will be zero percent in 2027. The Section 179 deduction is a dollar amount. The maximum deduction in 2024 is $1,220,000. Businesses and their advisers need to understand how to maximize the interplay of these deductions.

Listen as our panel of tax strategists explains capitalizing and expensing real estate purchases for investors, landlords, and their tax advisers.

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Outline

  1. 1st year expensing
    1. Bonus depreciation
    2. Section 179
    3. Legislation
  2. Nonresidential vs. residential property
    1. Depreciable life
    2. Permanent structure
    3. Qualified improvements
    4. Mixed-use property
  3. Repair regulations
    1. Safe harbors
    2. Tangible property regulations
  4. Dispositions
    1. Partial dispositions
    2. Depreciation recapture

Benefits

The panel will cover these and other these and other critical issues:

  • Strategies for accelerating deductions for real estate properties and maintenance
  • Electing the materials and supplies, routine maintenance, and de minimis safe harbor provisions
  • Maximing bonus depreciation Section 179 and their interaction
  • Distinguishing capital improvements from deductible repairs
  • Scenarios demonstrating deductions for HVACs, roofing, and routine maintenance

Faculty

Shore, Justin
Justin Shore, EA
Manager - Advisory
Hall CPA

 Mr. Shore is a Senior Advisor with over 10 years of accounting and tax experience, including running the...  |  Read More

Sosa, Nathan
Nathan Sosa, CPA, MST
Senior Advisor
Hall CPA

Mr. Sosa is a Senior Tax Advisor at Hall CPA PLLC.  

 |  Read More

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