Commercial Property Investors-Must Read!

May 10th, 2025 at 6:45 AM

With bonus depreciation declining to 40 percent this year, Section 179 expensing is a powerful alternative. It allows you to deduct up to the full cost of personal property and eligible improvements in the year you place them in service. For 2025, the maximum deduction is $1.25 million, with phaseouts beginning at $3.13 million.

Eligible improvements include:

• Interior upgrades to commercial buildings (qualified improvement property)
• New roofs
• HVAC systems
• Fire alarms and security systems

It’s important to note that land improvements such as parking lots and landscaping are excluded from Section 179, though they may qualify for bonus depreciation.

To qualify, the property must be purchased (not gifted or inherited), must be used in an active trade or business, and must not be acquired from a related party. Passive investments—especially those under triple-net-lease arrangements—generally do not meet the “active business” test. But active involvement in property management can help establish qualification.

You may also combine Section 179 with bonus depreciation for a strategic tax advantage. For instance, if your defined business income doesn’t cover the full deduction under Section 179, bonus depreciation can bridge some of the gap—offering a flexible and potentially lucrative approach.

Mark S. Fineberg, CPA