CARE FACILITIES AND COST SEGREGATION STUDIES…PART III OF IV...

CARE FACILITIES AND COST SEGREGATION STUDIES…PART III OF IV...That was a lesson in making money. Now we are going to discuss how to pay less income taxes and keep what you earn. You save income taxes by taking a large, maybe a HUGE income tax deduction for what is known as Bonus Depreciation. Let’s talk about this. When you purchase an apartment building, for example, you are buying three things. You are buying land, which is not depreciable because it will be there forever. The Structure, the walls, the floors, and the roof and that will be depreciated over a useful life of 27.5 years according to the Internal Revenue Code. Then you are buying the kitchen appliances, the kitchen and bathroom cabinets and counter tops, the doors, the ceiling fans and even the pop out windows, anything that can be removed from the structure without destroying the structure, and these things are called TANGIBLE PERSONAL PROPERTY! These three things are determined by a special company doing a COST SEGREGATION SURVEY. Under normal circumstances these items of Tangible Personal Property are depreciated over 5, 7.5 or 15 years using various straight line and accelerated methods.But BONUS DEPRECIATION says that you can deduct the cost of these items, and I will explain in a minute that Bonus Depreciation is in the process of being phased out, in one year. When you add all of this up over a 20 or 30, or 100 unit or more apartment building you have a HUGE number!!! And the trick is, and very few Certified Public Accountants, Enrolled Agents, Commercial Brokers or Realtors know that you also prepare a Cost Segregation Study when selling the property because you can turn ordinary income into capital gain income taxes at a lower rate!!! Why don’t you ask your Certified Public Accountant about this???As I said, Bonus Depreciation is being phased out. As of December 31, 2022, you were able to deduct $1 million in Bonus Depreciation in one year. For 2023 it is $800,000 and for 2024 it is $600,000 and it goes down by $200,000 each year until it is lost in 2027. Now, I said that I was a practicing Certified Public Accountant for over 50 years before getting into real estate. I have seen benefits like bonus depreciation be phased out before and Congress and the government has always come up with something to replace it and they will most likely do the same thing this time. My partner sent an article to me back on June 13, 2023, and it talked about Congress extending the original Bonus Depreciation rules to 2027. How do you like that? I’ve been saying something almost exactly like that since they talked about totally phasing out the Bonus Depreciation rules!!!