Real Estate Acquisitions: Maximizing Expensing and Depreciation Deductions

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.

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

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

Learning Objectives

After completing this course, you will be able to:

• Determine guidelines for deducting routine maintenance
• Identify units of property
• Decide how to maximize Section 179 and bonus depreciation
• Ascertain differences between betterments, adaptations, and restorations

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and their respective partners and shareholders.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).