If you own rental real estate property, being aware of the new 2024 depreciation rules will assist you in maximizing your tax deductions and safeguarding your investment. Depreciation allows owners of rental property to spread their rental property's cost out over time, which lowers taxable income — but there are new changes and clarifications for 2024 that can impact how much you can claim and when.
Important Depreciation Amendments for 2024
There are some substantial updates and alterations introduced in 2024 by the tax authorities that property rental investors should understand:
1. Phase-Out of Bonus Depreciation
Bonus depreciation of 100%, which was given on qualified improvements in earlier years, is phased out. During the 2024 tax year, the percentage of bonus depreciation is 60% (lowered from 80% for 2023). This provision covers property enhancements like appliances, air conditioning, and other qualifying properties.
Pro Tip: If you intend to make improvements to your Santa Monica rental property, you will want to act quickly to take advantage of the remaining bonus depreciation.
2. Qualified Improvement Property (QIP)
QIP applies to commercial property (not residential rental). If you've installed improvements in your rental that qualify as Qualified Improvement Property (QIP), they still have a 15-year depreciation schedule. But since bonus depreciation is gone, you may no longer be able to write off the full cost in a single year.
Important: If you’ve upgraded your Los Angeles rental’s interior (such as new flooring or remodeling a kitchen), ensure these costs are properly classified to maximize your deduction.
3. Section 179 Expensing
Section 179 allows you to depreciate the full cost of some equipment and improvements in the year that they go into service. Residential rental real estate, though, typically is not eligible under Section 179, except for a few things such as fire alarms or security systems.
Coastal Properties and Improvements
If your property sits near Venice, Malibu or Santa Monica beach, some improvements to defend against coastal erosion or storm damage will qualify for accelerated depreciation or special deductions. Make sure to categorize these accordingly.
Schedule of Phase Out of Bonus Depreciation:
2018–2022: 100% bonus depreciation.
2023: 80% bonus depreciation.
✅ 2024: 60% bonus depreciation.
2025: 40% bonus depreciation.
2026: 20% bonus depreciation.
2027: Bonus depreciation is fully phased out (0%).
Important Depreciation Amendments for 2024
There are some substantial updates and alterations introduced in 2024 by the tax authorities that property rental investors should understand:
1. Phase-Out of Bonus Depreciation
Bonus depreciation of 100%, which was given on qualified improvements in earlier years, is phased out. During the 2024 tax year, the percentage of bonus depreciation is 60% (lowered from 80% for 2023). This provision covers property enhancements like appliances, air conditioning, and other qualifying properties.
Pro Tip: If you intend to make improvements to your Santa Monica rental property, you will want to act quickly to take advantage of the remaining bonus depreciation.
2. Qualified Improvement Property (QIP)
QIP applies to commercial property (not residential rental). If you've installed improvements in your rental that qualify as Qualified Improvement Property (QIP), they still have a 15-year depreciation schedule. But since bonus depreciation is gone, you may no longer be able to write off the full cost in a single year.
Important: If you’ve upgraded your Los Angeles rental’s interior (such as new flooring or remodeling a kitchen), ensure these costs are properly classified to maximize your deduction.
3. Section 179 Expensing
Section 179 allows you to depreciate the full cost of some equipment and improvements in the year that they go into service. Residential rental real estate, though, typically is not eligible under Section 179, except for a few things such as fire alarms or security systems.
Coastal Properties and Improvements
If your property sits near Venice, Malibu or Santa Monica beach, some improvements to defend against coastal erosion or storm damage will qualify for accelerated depreciation or special deductions. Make sure to categorize these accordingly.
Schedule of Phase Out of Bonus Depreciation:
2018–2022: 100% bonus depreciation.
2023: 80% bonus depreciation.
✅ 2024: 60% bonus depreciation.
2025: 40% bonus depreciation.
2026: 20% bonus depreciation.
2027: Bonus depreciation is fully phased out (0%).