On this planet of depreciation planning, one small timing element continues to fly below the radar — and it is costing taxpayers critical cash.
Most individuals fixate on what a property prices or how a lot they will write off. However the placed-in-service date — when the IRS considers a property prepared and accessible to be used — performs a vital function in figuring out bonus depreciation eligibility for price segregation research.
And as bonus depreciation continues to part out (or probably bounce again), that timing has by no means been extra vital.
Why placed-in-service timing will get missed
The IRS defines “positioned in service” because the second a property is prepared and accessible for its supposed use.
For leases, meaning:
- It is accessible for transfer in; and,
- It is listed or actively being proven.
However in follow, this definition will get misapplied. Some actual property homeowners assume the time limit is sufficient. Others delay itemizing the property till after the brand new 12 months, lacking key depreciation alternatives.
And that hole between intent and readiness? That is the place deductions quietly slip away.
Bonus depreciation: The clock is ticking
Beneath present regulation, bonus depreciation is tapering quick:
- 2024: 60%
- 2025: 40%
- 2026: 20%
- 2027: 0%
The distinction between a property positioned in service on Dec. 31 versus Jan. 2 can translate into tens of 1000’s in rapid deductions.
And simply to make issues extra attention-grabbing — on Could 9, the Home Methods and Means Committee launched a draft invoice that may reinstate 100% bonus depreciation retroactive to Jan. 20, 2025. (The
The consequence? Accountants now must suppose in two timelines:
- What the present guidelines say; and,
- What Congress may say a couple of months from now.
It is a tough season to navigate — but in addition one the place proactive recommendation carries actual weight.
Typical situations the place timing issues
Positioned-in-service missteps do not all the time present up on a tax return — however they quietly erode what may’ve been higher outcomes. Some widespread examples:
- Finish-of-year closings the place the property is not listed or rent-ready till January.
- Quick-term leases delayed by renovation punch lists or allowing hang-ups.
- Business buildings ready on tenant enhancements earlier than changing into operational.
Every of those circumstances might contain a distinction of just some days — however that is sufficient to overlook a 12 months’s bonus depreciation share.
Planning strikes for the second half of the 12 months
As Q3 and This autumn method, listed here are a couple of strikes price making:
- Affirm the service-readiness timeline with purchasers buying property within the second half of the 12 months.
- Educate on what “in service” actually means — closing is not sufficient.
- Create a guidelines for documentation: utilities on, images of rent-ready situation, listings or lease exercise.
- Observe bonus depreciation eligibility relative to present and potential legislative shifts.
For properties acquired late within the 12 months, encourage purchasers to fast-track closing steps. The tax influence of being positioned in service by Dec. 31 versus Jan. 2 is bigger than most understand.
If the window closes, there’s nonetheless worth
Even when a property misses bonus depreciation, price segregation nonetheless creates long-term financial savings — particularly for high-income earners.
Partial-year depreciation nonetheless applies, and in some circumstances, Kind 3115 can enable for catch-up depreciation in future years. The technique might shift, however the alternative would not disappear.
Positioned-in-service dates do not normally present up on investor spreadsheets. However they’re some of the controllable levers in maximizing tax financial savings. For CPAs and advisors, serving to purchasers navigate that timing accurately can ship outsized outcomes.
As a result of on the finish of the day, sensible tax planning is not nearly what you purchase — it is about while you put it to work.
