$1.60 of bonus depreciation for every dollar of equity our investors put in. In a single tax year.
This is the IOS tax story that does not get enough attention.
Most commercial real estate depreciates over 39 years. The same depreciable basis spread over 39 years generates less than 4% of what bonus depreciation delivers in year one. Slow, predictable, and small.
IOS is physically different. The value is in land improvements: concrete paving, fencing, canopy structures, service bays, lighting. Under MACRS, these fall into 5, 7, and 15-year asset classes. Not 39. Combined with bonus depreciation, they can be written off immediately.
Here is how that recent Texas IOS deal breaks down as a percentage of purchase price:
5-year property (equipment, fixtures): ~8%
7-year property (office furniture, lighting): ~1%
15-year property (paving, fencing, canopy): ~69%
39-year property (actual building): ~17%
Non-depreciable land: ~5%
Everything except the building and land qualifies for accelerated depreciation.
That is more than 30 times the year-one write-off you would capture from the same basis spread over 39 years.
Strong cash flow on top of that once we lease out the second half of the property.
The asset class is unglamorous by design. That is exactly what I want.
If you are an accredited investor and want to learn more about investing in IOS, feel free to reach out directly. Would love to walk you through the tax story and share what we are seeing in the market.
