In today’s healthcare landscape, physicians and practice owners wear two hats. You’re not only providers of exceptional care – you’re also business leaders making strategic financial decisions that shape the future of your practice. One powerful yet often overlooked tool in this process. Using commercial real estate ownership as a financial strategy.
A prime example is bonus depreciation, also referred to as OB3. When understood and applied correctly, it can free up cash, reduce tax burdens, and accelerate growth. For medical professionals considering expansion, relocation, or investing in their own facility, this is a strategy worth paying close attention to.
What exactly is bonus depreciation?
At its core, depreciation is an accounting method that spreads the cost of assets, like medical equipment or building improvements – over time. Normally, items such as HVAC systems, cabinetry, or flooring might be written off over decades. Bonus depreciation changes the game by allowing you to take a large upfront deduction instead of waiting years.
For example, if you spend $500,000 on improvements for a new medical office, bonus depreciation could allow you to deduct most of that amount in the first year instead of stretching it over 15 or 30 years. That means more cash in your pocket now – you can reinvest cash into your practice.
The Tax Cuts and Jobs Act of 2017 temporarily supercharged this tool by allowing 100% bonus depreciation on qualifying assets placed into service between 2017 and 2022. The deduction has been phasing down – 80% in 2023, 60% in 2024 but thanks to new legislation, Congress permanently reinstated 100% bonus depreciation beginning January 19, 2025. This makes it a lasting and reliable strategy for healthcare real estate investors.
Why it matters for healthcare professionals
Healthcare practices are capital-intensive. Think about what goes into building or expanding the facility:
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Medical equipment: imaging machines, therapy devices, dental chairs.
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Office buildouts: exam rooms, waiting areas, labs.
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Specialized improvements: ADA-compliant plumbing, upgraded electrical, HIPAA-compliant layouts.
By pairing bonus depreciation with a cost segregation study – an engineering-based analysis that reclassifies building components into shorter depreciation schedules, many of these assets qualify for accelerated write-offs.
The impact can be significant. Some studies show bonus depreciation paired with cost segregation can increase first-year write-offs by up to 550%. In one case reported by Business Insider, a property owner invested $10,000 in a cost segregation study and saved $1.8 million in taxes in return. For a healthcare practice, those dollars could easily be redirected into hiring staff, expanding services, or opening a second location.
How this fits into a larger real estate strategy
Bonus depreciation is powerful, but it’s most effective when paired with smart real estate decisions. This is where working with a healthcare-focused commercial real estate advisor makes all the difference.
Here’s how strategy ties in:
1. Property Acquisition Guidance
Identifying properties with strong depreciation potential such as medical office buildings designed for specialized improvements – maximizes the benefit.
2. Cost Segregation Advisory
Working with tax professionals and engineers ensures every eligible asset is captured, leaving no savings behind.
3. Buy vs. Lease Analysis
Ownership isn’t always the right choice, but when bonus depreciation and equity growth are factored in, buying can often deliver outsized long-term value compared to leasing.
4. 1031 Exchange and Reinvestment Planning
Selling one property and reinvesting proceeds into another can be structured to pair with bonus depreciation, creating compounding advantages over time. Together, these strategies transform real estate from a basic “place to practice” into a financial engine for long-term stability and growth.
Timing is everything
Because bonus depreciation has now been permanently restored to 100% starting in early 2025, the time to act is now. Aligning acquisitions, renovations, or developments with this timeline ensures your practice captures the maximum deduction.
If you’re considering:
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Building a new medical office
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Purchasing an existing facility
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Renovating your current location
It’s worth structuring your project so that assets are placed in service under the new bonus depreciation rules. The earlier you plan, the better the outcome.
Bringing it all together
At the end of the day, commercial real estate ownership isn’t just about bricks and mortar – it’s about building financial resilience. For physicians and practice owners, bonus depreciation is a tool that can reduce taxable income, free up capital, and reinvest dollars back into patient care and practice growth.
At InvestingInCRE.com, we specialize in helping healthcare professionals unlock these opportunities. From guiding acquisitions to coordinating with CPAs on cost segregation studies, we ensure your real estate strategy is aligned with your clinical and financial goals.
Final Thoughts
For healthcare professionals, every decision about practice growth carries both medical and financial weight. Bonus depreciation is one of those rare strategies that strengthens both sides – supporting your mission to care for patients while simultaneously fueling your long-term wealth.
If you’re exploring expansion or ownership, let’s discuss how bonus depreciation can be integrated into your real estate strategy. Together, we’ll design a plan that maximizes tax benefits, strengthens cash flow, and creates a healthier future – for your practice and your patients.
