All Forum Posts by: Bryan Johns

Quote from @Josh Lewer:

 but those get technical with their own pitfalls and would depend on your specific facts.

Interesting... If another business of mine is planning to build out an office on the land that is being demolished, it would therefore have an interest in the work. Given that, can that business (currently operating and generating income) pick up the demo bill as a necessary expense for growth? Or would that just transfer the demo cost to another the balance sheet where it gets stuck? Is there any way to deduct this expense this year?

Thank you! So basically, if the LLC that owns the property spends $30k to demo the structure, this gets added to basis and the benefit is at some future point beyond 2025.

Thank you. I don't think I can establish that we had no intent to demo. The buildings have some flood damage so provide no usable value unless we do at least minor rehab to put it into service. The question was just do we demo in 2025 or a future year? 

If we rehab and the storage use works out, we may keep buildings. If it doesn't work out, we will demo as early as 2026.

I don't understand how the demolition loss factors in - either this year or next year - I just know we need some tax write-offs this year!

We purchased some property for $350k with two old buildings on it. The county also recently assessed the value at $350k, split between $130k improvements and $220k land.

We had planned to demo the older structures (one is a small house, one is a large barn) in 2025 and then begin to develop the land in 2026. However, the demo permit continues to be delayed so we are now thinking of putting the buildings into service (as storage rental space) this year.

My understanding that this would allow us to do cost seg to get depreciation in 2025. Questions for the experts:

1. If we take bonus depreciation in 2025, can we still demo in 2026 with no issues?

2. can I do DIY cost seg given this is such a small property? If so, what is the best option for that?

I actually am now planning to keep the building and put it into service as a storage rental (for another business of mine). I wouldn't not plan to demolish it.

Thank you. The county recently assessed the value at $350k, which is the same that I paid for it. Their split was $130k improvements and $220k land. Will whoever does the cost seg factor that in? Or do I need an actual appraisal?

If I try to do this myself, is my starting point for bonus depreciation $130k minus building structure? Or do I start at $0 and add elements until there's nothing left?

Thank you. No "driveway" as it is just a gravel road, but the other stuff should qualify.

Quote from @Julius V.:

Thank you so much for the info. I will send you an email to discuss more. 

Actually, I think I'm confusing something here and maybe this isn't as good as I hoped... Since I purchased the property this year for $350,000, then that is my total basis. I would then need to calculate the depreciable portion for just the structure that I am planning to put back into service. Could I use the county appraised value (non-homesite improvements vs land) to get that? 

Or would I only be able to depreciate improvements that I did on the structure to put it into service?

@Ashish Acharya:

@Bryan Johns Yes, holding off on demolition could create meaningful short-term tax advantages if you depreciate the existing structures before tearing them down. Since the improvements (home and shed) are valued at $150,000, you could start depreciating them now, generating deductions that offset income—especially useful in a high-tax year.

Here’s how it typically works:

• If you place the property in service (e.g., rent it out, use it temporarily), you can begin depreciation on the structure.
• Later, when you demolish the buildings, you would write off the remaining undepreciated basis as a loss—but only if the property was used in a business or income-producing activity before demo.
• If you demo right away without placing it in service, you lose depreciation benefits and must capitalize the demolition costs into the basis of the new development.

So, waiting until 2026 to demolish may allow you to claim depreciation in 2025 and potentially deduct the remaining basis upon demo. This could be especially valuable if you expect meaningful income in 2025.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Thank you for this response. I somehow missed it but just came across. 

Given the bonus depreciation back at 100%, does keeping these structures and putting them into service as a storage rental business (for another business of mine) make sense? The 2025 appraised value on improvements is $250k, with taxes estimated at about $12k.