Big, Beautiful Bill Could Reignite Real Estate Investment With Bonus Depreciation and Opportunity Zones.
The Big, Beautiful Bill could reignite real estate investing and development. Specifically, 100% bonus depreciation has been reinstated for properties bought after January 2025 and thereafter. The bonus depreciation also includes assets like machinery, equipment, computer software and qualified improvement property. Qualified Improvement Property is defined as any improvement made to the interior of a nonresidential building after the building is placed in service. Improvements must explicitly exclude expansion of the building, elevators and escalators, and changes made to a building’s internal structural framework. Any property that is subject to the rules of QIP and is leased by a single tenant now falls under the rules for QIP for tax accounting purposes.
With the passage of the Tax Cuts and Jobs Act (TCJA) in 2017, the tax treatment of qualified improvement property was simplified, and the specific categories known as Qualified Leasehold Improvement Property (QLIP), Qualified Restaurant Property (QRP), and Qualified Retail Improvement Property (QRIP) were consolidated into a single classification named Qualified Improvement Property (QIP).
A cost segregation study would be recommended to identify which items in a building are on current depreciation schedules in order to then be able to replace and depreciate those items 100% up front.
Another game changer is that the bill brings back Opportunity Zones and makes them permanent. An investment in an opportunity zone that meets the necessary requirements and held for 10 years could be sold tax-free.
The video above features real estate investor Ken McElroy, Danielle McElroy and 1031 Exchange expert Scott Saunders, discussing the tax benefits that real estate investors can utilize from the Big, Beautiful Bill. Ken has a great podcast if you want to tune in reguarly, at https://YouTube.com/@KenMcElroyPodcast