Message From the CEO
One of the many advantages of real estate ownership is the tax benefits.
Syndications establish a business owned by the managing partners and investors. This structure creates tax advantages that reduce taxable income, effectively increasing the rate of return for investors without affecting the profitability of the investment.
Depreciation is one of these valuable tax advantages because it allows us to deduct property expenses and improvement costs. Businesses typically subtract 100% of operating costs and depreciate capital expenditures, which includes all property expected to last more than a year. Depending on the asset, deprecation can last up to 39 years.
In 2015, the Tax Cuts and Jobs Act expanded Bonus Depreciation to 100% of the purchase price on qualified assets. The ability to fully depreciate property in the first year of ownership benefits investors because of the shorter hold period. The depreciation schedule falls to 80% as of January 1, 2023, and declines further until 2027, when the bonus depreciation provision ends.
At McKee Capital Group, we maximize bonus depreciation by conducting a cost segregation study on our properties. We can then deduct individual components of the multifamily complex that qualify for the bonus depreciation, giving us a significantly larger depreciation deduction in the first year of ownership.
We can apply the 100% bonus depreciation to any purchase closed by December 31, 2022. In late September, we will buy our last multifamily complex for 2022, giving investors one final opportunity to benefit from the 100% bonus depreciation tax benefit.
Regards,
Jeff McKee
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