Bonus Depreciation and Year 1

[Raj Sid]

Bonus Depreciation

If i purchase a new construction as investment and put in service for rental, upgrades on top of the base price of the House(As sold by builder), can I deduct it on year 1? Example, if I upgraded the floor or added other items during construction, can I deduct that entire amount in year 1?

Thank you

[Yonah Weiss]

@Raj Sid The main structure of the building depreciates over 27.5 years.  The 5-year property (sec.1245 of the tax code) include assets withing the property, generally referred to as 'personal or tangible property'. These assets depreciate over a five year period, and can the depreciation can be accelerated to be deducted over the first five years. Same goes for 15-year property ('land improvements, i.e. landscaping, pavement, fencing)

Bonus depreciation allows you to either claim 50% or 100% of the depreciation of those assets in the FIRST year!

Commercial property depreciates over 39 year period, but the rest of the rules are the same.

There is some confusion between '179 deductions' which allow you to deduct certain equipment and other part of new construction in the first year. 

Please advise with your accountant, to see which works best for your situation.