Accelerated bonus depreciation to cover Capital gains by selling real estate

Curious_George_123 · ‎April 28, 2026

I purchased a rental property in 2015, and I plan to sell it in 2026. I am actively involved in the business, meaning that the income from real estate is considered active income rather than passive income. I am also planning to buy a gas station with a convenience store, which has an area of less than 1,000 square feet. Can I use the accelerated bonus depreciation from the purchase of the gas station to offset the capital gains from the sale of the rental property? Any response would be appreciated. Thank you.

PatriciaV

From the viewpoint of overall taxable income, depreciation can offset ordinary income. However, the rules for Special Bonus Depreciation may not apply to a gas station. To qualify for bonus depreciation, the assets must be tangible property with a recovery period of 20 years or less, which includes machinery, equipment, vehicles, and interior improvements to nonresidential buildings. Commercial buildings generally have a 39 year class life and aren't eligible for accelerated depreciation.

That said, bonus depreciation offsets business income that is reported on Schedule 1 Line 3 and the total of Schedule 1 flows to Form 1040 Line 8 to be included with all other taxable income. Capital Gains are reported on Form 1040 Line 7a.

For more info, see IRS Pub 946 Depreciation of Property.

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Mike9241

you may want to have a cost segregation study done. It allocates the cost among the different classes of assets.

Different classes have different depreciable lives. For example, the service station falls into asset class 57.1, which has a 15-year life. The cost is unknown. Nor is it known if the yax benefit of quicker depreciation on some components would outweigh the cost.

Cost segregation studies are conducted by specialized professionals, typically teams of engineers, CPAs, and tax consultants, or certified cost segregation specialists.
Professional Firms and Consultancies
Cost segregation studies are often performed by engineering-based consultancies and accounting firms that specialize in real estate tax strategies. These firms conduct detailed examinations of construction and accounting records, identify building components eligible for accelerated depreciation, and produce IRS-compliant reports.