Bonus/Accelerate Depreciation Explained

Buy Three Properties, Get One Free? The Truth About Bonus Depreciation

If you’ve been around real estate investing long enough, you’ve probably heard people rave about the tax benefits. But every once in a while, something comes along that feels almost too good to be true. That’s exactly what happened when Congress passed recent updates to the tax code that expanded bonus depreciation.

Now, I know — “bonus depreciation” doesn’t sound exciting. It sounds like something your accountant might mumble to you while you’re trying not to fall asleep. But here’s why you should care:

For many investors, it can literally feel like buy three properties, get one free.

What Is Bonus Depreciation?

Normally, when you buy a rental property, you get to depreciate it over 27.5 years. That’s just the IRS’s way of saying, “We’ll let you write off the house as if it’s slowly wearing out.” The problem is, 27 years is a long time to wait.

That’s where bonus depreciation comes in. Through a process called a cost segregation study, you can break your property down into its parts — roof, landscaping, driveway, carpet, paint, appliances — and accelerate the depreciation on the parts that wear out faster.

Instead of spreading those write-offs over decades, you can take a huge portion up front, in year one.

How Big Are the Savings?

Here’s a simple example we shared on the show:

• Buy a $300,000 property.

• Do a cost segregation study.

• You may be able to accelerate about $84,000 of depreciation in year one.

Now, if you’re in a 35% tax bracket, that’s around $30,000 in tax savings.

That’s not Monopoly money. That’s a real check you don’t have to send to the IRS.

The “Buy Three, Get One Free” Effect

Imagine you buy three properties. If each generates around $30,000 in tax savings, that’s about $90,000 you’ve kept in your pocket.

Instead of mailing that to Washington, you could use it for a down payment on your fourth property.

That’s why we joke that the government just launched a “Buy Three, Get One Free” program for real estate investors. It’s not a literal promotion on WhiteHouse.gov — but it might be the most powerful tax lever you’ve never pulled.

Who Qualifies?

Here’s the best part: almost every investor can benefit in some way. The exact impact depends on your situation:

• Passive investors can offset rental income with bonus depreciation.

• Active investors earning under $150K can apply up to $25,000 against ordinary income.

• Real estate professionals (or their spouses) can potentially use it to offset W-2 or 1099 income.

• If you can’t use all the depreciation now, you can carry it forward for future years.

Either way, the benefits stack up.

How to Get Started

If you’ve bought a property this year, you may already qualify. Here’s a simple roadmap:

1. Talk to your coach. Reach out and we’ll help you see if bonus depreciation applies to your situation.

2. Loop in your accountant. Some CPAs specialize in real estate — we can introduce you if you don’t have one.

3. Get a cost segregation study. Yes, it costs a couple thousand dollars. But it often unlocks tens of thousands in tax savings.

4. Reinvest your savings. Instead of writing a check to the government, put that money to work building your portfolio.

At the end of the day, real estate isn’t just about cash flow and appreciation. It’s also about what you keep. Bonus depreciation is one of the most powerful tools we have as investors to accelerate growth while minimizing taxes.

Want to see if this could work for you? Reach out, and let’s have a conversation. An hour spent exploring this strategy could change the entire trajectory of your financial future.