Enhance tax benefits with 100% bonus depreciation for properties acquired after January 19, 2025. Timing and documentation are key.
I recently spoke with a real estate owner who was thrilled about a new acquisition.
“The deal’s great, the numbers work, and with the new bonus depreciation,” he said, “we’re set to have big savings passed through to our investors.”
He had every reason to be excited. The One Big Beautiful Bill Act (OBBBA) makes 100% bonus depreciation permanent for qualifying property acquired and placed in service after January 19, 2025.
This change presents a powerful opportunity for real estate investors to boost cash flow and accelerate returns. But as our conversation continued, a critical question emerged:
“When is an asset actually ‘acquired’?”
The four paths to asset acquisition
The timing of acquisition is key to claiming bonus depreciation. Eligibility starts with knowing how your property was acquired.
Purchased under a written binding contract
This is the most common route. The acquisition date is the latest of the following:
- The date the contract was signed
- The date it became enforceable under state law
- The date any cancellation periods expire
- The date all contingencies are satisfied
Be cautious of provisions that could undermine the contract’s “binding” status, such as liquidated damages clauses under 5% of the purchase price or contingencies within your control. Also, letters of intent (LOIs) and options to acquire do not qualify as binding contracts.
Purchased without a written contract
Less common in large-scale deals, but still relevant. The acquisition date depends on your accounting method:
- Cash basis — When you pay more than 10% of the total cost.
- Accrual basis — When you incur a liability exceeding 10% of the total cost.
Self-constructed property
For ground-up developments or custom builds, the acquisition date is when physical work of a significant nature begins. Planning, design, and financing don’t count. Even if a third party handles construction, the key is when the actual work starts.
A safe harbor allows construction to be considered as having begun once more than 10% of the project's total cost has been paid or incurred.
Off-the-shelf purchase
The simplest category. For ready-made assets like modular homes, appliances, or equipment, the acquisition date is when you take physical possession or control.
The power of documentation
Thorough documentation is essential for substantiating acquisition dates and qualifying for 100% bonus depreciation. Maintain a complete file with a detailed acquisition timeline, executed contracts, LOIs, purchase orders, change orders, lease agreements, and payment records. This organized approach can help confirm eligibility and enhance available tax benefits.
How CLA can help with strategic tax planning
Accurately determining acquisition dates is key to qualifying for 100% bonus depreciation. We support clients by building clear documentation, aligning reporting with current tax law, and implementing practical strategies that promote compliance and unlock valuable tax benefits.
Whether you're managing a single asset or a multi-state portfolio, CLA is here to help.