Last-Minute Tax Tips of 2022 That Every Real Estate Professional Needs to Know

Abstract

Know about deductions ending this year Under the Tax Cuts and Jobs Act of 2017, businesses have until December 31, 2022 to take advantage of the full extent of the bonus depreciation deduction. Congress initially wrote and later expanded the breadth of the bonus depreciation deduction as a stimulus measure that would encourage business owners to purchase more assets, so the gradual phase-out of the bonus depreciation deduction will have a ripple-effect beyond the world of real estate. Cost segregation is a method of tax deferral that frontloads real estate asset depreciation deductions into the first few years of ownership. For businesses in the fields of architecture, engineering, and construction, the 179D Commercial Building Energy-Efficient Tax Deduction may offer ongoing tax advantages. There is a 250,000 square foot maximum benefit that may be deducted, so for an eligible building, the deduction would increase from a $470,000 tax cut at the current rate to a $1.25 million tax break with the new rate. Building owners can retrospectively claim the deduction going all the way back to the 2006 tax year by submitting an accounting method adjustment, but a business should make the claim in the tax year that the building is put into use. Contrary to building owners, an architecture, engineering, or construction business must file an amended tax return in order to claim the deduction if it is missed on a current-year tax return.