Top 5 tax strategies for real estate owners

These studies are specifically beneficial to real estate investors, as they allow for accelerated depreciation of identified assets that may otherwise be trapped in long-life building assets.

Currently, this opportunity is greatly enhanced with the introduction of 100 percent bonus depreciation from the TCJA, but only on those specific assets identified in a cost segregation study. The personal property and land improvement assets that are currently being depreciated over 39 years can be adjusted to a shorter life, and therefore bonus-eligible — 100 percent bonus means immediate expensing for those items.

The TCJA has also expanded the definition of assets available for 100 percent bonus depreciation to include acquired or used property. This is another huge opportunity for quicker write-offs for investors who are acquiring property.

Yes, tangible property regulations still exist today and have survived all subsequent tax laws and changes. TPRs have provided taxpayers with a new definition of repairs and have made expensing opportunities easier. This includes things like HVAC rooftop units, roofs and other building units of property that previously had to be capitalized and depreciated over a long life — even better, these expensing opportunities can be applied retroactively. An asset that was properly capitalized under the old rules that meets the new definition of expense can be written off with an automatic approval of a change in accounting method.

The TPRs have also provided an opportunity to write off the remaining basis of structural components for the first time. Prior to this change, for example, taxpayers would oftentimes be depreciating two or three roofs, or more, on the same building. But the TPRs allow for writing off the basis of the old roof, if it is specifically identified. This is the case for all replaced structural components of a building.

An additional immediate expensing opportunity available includes the de minimis safe harbor that was introduced with the TPRs. This safe harbor allows taxpayers to elect to deduct certain items that fall under a specific dollar threshold. The de minimis rules, when properly elected and utilized, provide an opportunity to expense many expenditures every year that would otherwise be capitalized, and also provides for additional administrative convenience. This immediate expensing opportunity has been popular and allowed for tremendous savings for taxpayers.