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    Bonus Depreciation for Car Wash Properties

    Bonus Depreciation for Car Wash Properties

    Understanding Bonus Depreciation

     

    Bonus depreciation allows businesses to deduct a significant portion of an asset’s cost in the first year it is placed in service. This tax incentive was expanded under the Tax Cuts and Jobs Act (TCJA) of 2017, allowing for 100% depreciation on qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. However, this percentage is set to phase out, decreasing to 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026 before being fully phased out in 2027. Just remember, it is essential to consult your tax and accounting advisors before engaging in any transaction involving bonus depreciation to evaluate the terms and the tax implications for your specific situation.

     

    Benefits for Car Wash Properties

     

    Car wash properties, particularly those with substantial equipment investments, benefit greatly from bonus depreciation. These facilities often require significant expenditures on specialized equipment such as automated wash systems, water reclamation systems, and drying equipment, all of which qualify for accelerated depreciation. This allows car wash owners to quickly recoup their investments, improving cash flow and reducing tax liabilities.

    Growth in the Car Wash Industry

     

    Growth in the Car Wash Industry | Car Being Washed

     

    Within the world of commercial real estate, the car wash industry has been experiencing robust growth, driven by increased consumer demand for automated car wash services. Reports indicate significant investment activity, with both private and institutional investors showing heightened interest in car wash properties due to their strong cash flow potential and tax advantages. The industry is expected to continue expanding, making car wash properties an attractive investment opportunity.

    The global car wash service market size was estimated at USD 32.47 billion in 2023 and is anticipated to grow at a compound annual growth rate (CAGR) of 6.1% from 2024 to 2030

     

    US Car Wash Service Market Graph

     

    Strategic Tax Planning with Cost Segregation

     

    Cost segregation is a valuable strategy for car wash owners looking to maximize their tax savings. By reclassifying components of a property from real property to personal property, owners can accelerate depreciation deductions. This strategy is particularly effective for car wash facilities, given the high value of their specialized equipment. When combined with bonus depreciation, cost segregation can significantly enhance the financial benefits of owning a car wash. For starters, view some of Brisky’s Trademark Car Wash and WhiteWater Express Car Wash properties

    Understanding and Leveraging Bonus Depreciation 

     

    For investors and operators in the car wash industry, understanding and leveraging bonus depreciation is crucial. The accelerated depreciation of car wash equipment not only provides immediate tax benefits but also supports the industry’s growth by improving cash flow and reducing financial burdens. As the industry continues to expand, staying informed about tax incentives and strategic planning opportunities will be key to maximizing returns on car wash property investments.