With 100% bonus depreciation now a permanent fixture under the One Big Beautiful Bill Act (OBBBA), investors have unprecedented opportunities to minimize their tax obligations through strategic acquisitions. While a cost segregation study typically allows traditional real estate – such as apartments, retail, offices, and industrial buildings – to reallocate 15 – 25% of assets to shorter depreciation schedules, certain other unique asset types can generate even greater results. Some “outside the box” investments allow for the immediate expensing of up to 100% of the depreciable assets. This month we explore these specialized assets that maximize bonus depreciation and, when leveraged properly, could potentially recoup a property owner’s entire investment in year one.
Recreational Facilities
Recreational facilities are uniquely positioned to generate high depreciation benefits due to the combination of multiple short-life assets, specialized equipment, and land improvements.
Key Specialty Assets: Personal property such as lockers, specialty flooring, bleachers, playground/gym equipment, arcade machines, sports gear, lighting systems, sound and AV equipment, and specialized HVAC or plumbing systems
Potential Reclassification: Investors can typically see 30-40% of the purchase price reclassified and benefit from bonus depreciation.
Tax Savings Example: See the attached case study for details showing how a CRS client was able to obtain a first-year tax savings of over $2.5 million on their recreational facility purchase.
Marinas
Marinas are rich with unusual assets that fall into shorter recovery periods. Specialty equipment along with other typical 15-year property, such as parking lots and landscaping, are all eligible for 100% bonus depreciation.
Key Specialty Assets: Docks, bulkheads, boat lifts, dock utility hookups / lighting, floating platforms.
Potential Reclassification: 50-75% of the purchase or construction costs can typically be written off in the first year.
Hotels and Restaurants
Investing in a property that has a restaurant and/or hotel tenant, or owning one, offers another investment that can generate a significant amount of first-year bonus depreciation. Both asset types typically have extensive interior improvements that qualify for shorter depreciation lives and specialty classifications.
Key Restaurant Assets: Kitchen equipment, walk-in coolers, refrigeration systems, and specialized cooking appliances.
Potential Restaurant Reclassification: Restaurants can typically see 30-35% of the purchase price reclassified and benefit from bonus depreciation.
Key Hotel Assets: Furniture, fixtures, carpeting, signage, and AV equipment.
Potential Hotel Reclassification: Hotels can typically see 25-30% of the purchase price reclassified and benefit from bonus depreciation.
It’s important to note that separating key assets in both categories from the building structure can only be done through a cost segregation study.
But Wait, There’s More!
While the specialty purchases above offer higher benefits from cost segregation and bonus depreciation than other typical commercial real estate, two unique asset classes offer investors exceptional opportunities to turn nearly 100% of their investment into a tax depreciation benefit.
Car Washes and Gas Stations
Both car washes and gas stations offer a significant tax advantage through accelerated depreciation because they fall under a special IRS asset class, 57.1. This classification allows the buildings themselves to be treated as 15-year property rather than standard 39-year commercial real estate. For gas stations to qualify, more than 50% of the site’s revenue must come from the sale of petroleum products.
Key Specialty Assets: Fuel pumps, canopies, signage, plumbing systems, and car wash equipment.
Potential Reclassification: The strategic combination of asset class 57.1 structures, land improvements, and specialty equipment in a car wash or gas station typically enables an investor to immediately expense their entire costs (excluding the non-depreciable land value) in the first year. This front-loaded depreciation, coupled with a properly leveraged loan, may allow an investor to recoup their entire down payment or more through the resulting tax savings.
Tax Savings Example: See the attached case study for details showing how a CRS client was able to obtain a first-year tax savings of $379,000 on their investment in a car wash.
Stallions
Yes, you read that correctly. Investing in a racehorse can provide a tax depreciation equal to 100% of your investment costs.
Stallions purchased for breeding, racing, or training allow owners to deduct the full cost immediately.
Numerous stallion breeding investment funds are now being created in the market, which could be a beneficial addition to investment portfolios.
Key Related Assets: equine assets such as yearlings, two-year-olds in training, racehorses, broodmares, and stallions; facility Improvements such as special-use barns, fencing, and land improvements specifically designed for breeding operations; operational equipment such as farm machinery, tractors, and specialized tools required for training and maintenance.
How Can CRS Help?
To fully harness the tax advantages offered by these specialized asset classes, a cost segregation study is essential. CRS engineers can systematically identify and reclassify property components under the current tax code, ensuring assets qualify for the newly reinstated 100% bonus depreciation in the first year. Partnering with CRS optimizes the financial return on a savvy investor’s strategic purchases, such as those above, by significantly offsetting upfront costs and rapidly freeing up capital for the next acquisition.
