Tuesday, January 22nd, 2019

What are the benefits for GO Zone Real Estate Investing?

The material benefits of the GO Zone for real estate investing are:

1. Additional first-year bonus depreciation of 50% (fifty percent).

2. Increase in expensing of machinery, equipment and (in some cases) software bought
for use in a business from $105,000 to $205,000 and raised the phase-out level from
$420,000 to $1,020,000

3. Extension of net operating loss carryback to 5 years for losses attributable to the
bonus depreciation.

4. Partial expensing for demolition and cleanup costs to 50% of the capitalized costs.

5. Increase in rehabilitation credit from 10% to 13% and for historical buildings from
20% to 23%.

6. No alternative minimum tax (AMT) for bonus depreciation allowed expenses.

7. Some potential relief for forgiveness of debt.

These benefits were granted based on two levels of qualifications. The first level of qualification was the property itself. The legislations created a classification commonly called Go Zone property. To receive the tax benefits granted under the legislations, the property needed to achieve this classification.
The second level of qualification was the owner of the property. Assuming the property was classified Go Zone, then the underlying ownership needed also to be qualified to enjoy the tax benefits granted.
This two-tier qualification system was created apparently to focus and retain the benefits on certain geographical areas, to focus private investment towards certain types of real estate uses and to focus the tax benefits on a narrowly defined group of owners.