Bonus Depreciation

Maricela Soberanes Wednesday March 15th, 2023

As a multifamily real estate investor, you are always looking for ways to maximize your returns and reduce your tax liability. One tax strategy that may be of interest to you is bonus depreciation.

What is Bonus Depreciation?

Bonus depreciation is a tax incentive that allows businesses to immediately deduct a percentage of the cost of qualifying assets in the year they are placed in service. Prior to the Tax Cuts and Jobs Act of 2017, bonus depreciation was limited to new property only, but the law has now expanded it to include used property as well.

How Bonus Depreciation Works

Let’s say you purchase a multifamily property for $10 million. Under normal depreciation rules, you would have to spread out the cost of the property over 27.5 years for residential properties. However, with bonus depreciation, you may be able to write off up to 100% of the cost of the property in the first year.

For example, if you were able to write off 50% of the cost of the property in the first year, you could deduct $5 million from your taxable income. This could result in significant tax savings for you.

Benefits of Bonus Depreciation for Multifamily Real Estate Investors:

  1. Increased Cash Flow: By accelerating your depreciation, you can reduce your tax liability and increase your cash flow. This extra cash can be used to reinvest in your property or to pay down debt.
  2. Faster ROI: Bonus depreciation can help you achieve a faster return on investment by reducing your tax burden and increasing your net income.
  3. Competitive Advantage: Bonus depreciation can give you a competitive advantage in the multifamily real estate market. By reducing your tax liability, you can offer more competitive rental rates and attract more tenants.
  4. Flexibility: With bonus depreciation, you have more flexibility to manage your cash flow and invest in your property. You can reinvest the savings into upgrades, renovations, or new acquisitions.
  5. Preservation of Capital: Bonus depreciation allows you to preserve your capital by reducing your tax liability. This can help you maintain your financial stability and position your business for long-term success.


Bonus depreciation can be a valuable tax strategy for multifamily real estate investors. By accelerating your depreciation, you can reduce your tax liability, increase your cash flow, and achieve a faster return on investment. However, it’s important to work with a qualified tax professional to ensure that you are taking full advantage of this tax incentive and complying with all applicable laws and regulations.


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