Real Estate Tax Incentives And Strategies

Real Estate Tax Incentives And Strategies

The wide variety of real estate tax opportunities available can be overwhelming. To make sure you’ve considered all potential sources of benefit, review our expansive checklist.

​​☐​ Accelerated Depreciation

Look-back studies via 3115, best results achieved for properties in service under 15 years
Recall depreciation potential inherent in 754 Step Ups and 1031 Exchanges, as well as tax-exempt property

​​☐​ Bonus Depreciation
100% for properties placed-in-service between 9/28/17-12/31/2022
Acquired assets eligible under the TCJA

​​☐​ Bonus-Eligible QIP (Qualified Improvement Property)
QIP placed-in-service on or after 1/1/2018 is 15-year property and bonus-eligible – major implications for renovations/retrofits

​​☐​ Expensing Options under the Tangible Property Regulations (TPRs)
DeMinimus Safe Harbor (Itemized invoices will be helpful)
Small Taxpayer Safe Harbor
Routine Maintenance Safe Harbor (via 3115)

​​☐​ BAR and Materiality Testing (for Expensing Decisions under the TPRs)

​​☐​ Partial Asset Disposition (PAD Election)
Must be elected in the year the asset was removed from service
Subject to 280B Demolition Rules

​​☐​ Section 179 Expensing Election
Overall Expensing Dollar Limitation for TY 2022: $1.08M
Phase Out Threshold for TY 2022: $2.7M
Must be taken the year the work is placed-in-service

​​☐​ 1031 Exchange
Possibility of associated 15% Safe Harbor

​​☐​ EPAct 179D Deduction
Legacy program still in effect [Inflation Reduction Act (IRA) provisions not in play until TY 2023]
Maximum deduction of $1.88/SF, partial deductions permitted
For properties placed-in-service between 2015-2026, ASHRAE Reference Standard is 90.1-2007
May be claimed retroactively (3115)

​​☐​ Section 45L Credit
Legacy program still in effect [IRA Provisions not in play until TY 2023]
$2,000 credit per dwelling unit
Claiming the credit results in a mandatory basis deduction and corresponding decrease in subsequent LIHTC Credit

​​☐​ ITC (Solar Investment Tax Credit)
Rate determined by when “construction commenced” – 26% in 2021, 30% in 2022

​​☐​ LIHTC (Low-Income Housing Tax Credit)
4% credit (30% subsidy) for acquisitions, rehabs
9% credit (70% subsidy) generally for new construction and major rehabs without additional federal subsidies

​​☐​ HTC (Historic Tax Credit)
Rehabilitation of historic buildings — 20% of qualified rehab costs may be deducted

​​☐​ State-Specific Incentives

Have a question? Contact Bruce Johnson And Capstan Team.

As a founding partner at Capstan Tax Strategies, Bruce works closely with commercial real estate owners, investors, and accounting firms to provide practical, creative and client-specific solutions.

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