What Is the IRS Depreciation Schedule for Commercial Real Estate?
Commercial real estate is an asset qualifying for depreciation. It cannot be expensed as an ordinary method of write-off. However, in 2011, the US Congress passed legislation that allowed for 100% bonus depreciation on commercial real estate. In effect, this allowed for full expensing of the commercial real estate as an asset.
One way to accelerate your depreciation is through cost segregation. This allows you to reclassify your building into it’s individual building components, some of which have a life that is much shorter than 40 years. For example, if your building has a computerized security system, you could depreciate the computers in the security system over a five-year period. This moves a lot of your depreciation to the front of the depreciation schedule — earlier in your ownership of the building — and saves you money in the beginning. No doubt you have heard your CPA mention “time-value of money”! But by taking more depreciation up front, you have less depreciation to claim in the future. Of course, the dollar is worth more today than tomorrow, so that’s fine.