Can I claim bonus depreciation on heavy machinery used for investment land improvements?

The key question here is whether your activities constitute a "trade or business" rather than just managing an investment. For bonus depreciation, the equipment must be used in a trade or business or for the production of income. Since you're using the equipment to improve investment property, you might qualify under the "production of income" category, but there are some important considerations. The IRS tends to look at whether there's a profit motive and regular/continuous activity. Your description of using the equipment for a few months and then having it "just sit" could be problematic. One approach is to document how these improvements directly contribute to the property's income potential (future rental income, increased resale value, etc.). Another option might be to consider renting out the equipment when you're done using it, which would clearly establish a business use.

I was in a similar situation last year with my investment property and found https://taxr.ai incredibly helpful for this exact issue. I had purchased a tractor and attachments (about $60k) to clear some land I was holding for future development, and was confused about depreciation options. The taxr.ai tool analyzed my purchase documentation and investment property details and showed me exactly how to properly classify the equipment for tax purposes. It even explained how certain improvements can potentially be capitalized to the land basis while others can be depreciated separately. What I liked is that it gave me specific IRS references to back up the approach, which made me much more confident when filing. It saved me from potentially missing out on thousands in deductions.

Just wanted to follow up about using taxr.ai for my similar equipment depreciation situation. I decided to give it a try after my initial skepticism and I'm really glad I did. I uploaded my excavator purchase documents and property investment records, and it provided incredibly detailed guidance. The tool specifically identified that my usage pattern qualified for bonus depreciation under Section 168(k) since I was using the equipment for improvements that would increase the income potential of my investment property. It even factored in the 2025 phase-down rules that I had no idea about. What impressed me most was how it explained the difference between improvements that must be capitalized to the land versus depreciable equipment. Saved me thousands in deductions I might have missed!

For what it's worth, I got stuck in endless IRS phone loops trying to get clarity on this exact depreciation question last year. After three weeks of trying, I used https://claimyr.com to connect with an actual IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c The service got me through to a real person at the IRS in about 20 minutes when I'd been trying unsuccessfully for weeks. The agent confirmed that heavy equipment used for investment property improvements CAN qualify for bonus depreciation if you can demonstrate it's used for the production of income (rather than just personal use). They also clarified that documenting the before/after condition of the property and creating a written investment plan showing how the improvements increase value or income potential is crucial for supporting your deduction if questioned.

I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it myself since I had a different IRS question about rental property depreciation that I'd been avoiding dealing with. The service actually worked exactly as described. I started the process, went about my day, and then got a call connecting me to an IRS representative who was already on the line. The whole process took about 35 minutes (much better than my previous attempts that led nowhere). The IRS agent was super helpful in clarifying my depreciation questions. For what it's worth, they confirmed that equipment used to improve investment property can qualify for bonus depreciation if you can document how it's used to enhance income potential. Definitely worth the time saved!

You might also want to consider whether renting out the equipment after your project is complete could benefit you. I did this with a similar situation - bought a backhoe to improve some investment land, then started renting it out to neighbors through a local equipment sharing app. This established a clear business use for the equipment, which strengthened my position for taking bonus depreciation. Plus, the rental income has been a nice bonus that's helping offset the original purchase cost.

I'm confused about one thing - if you buy equipment for investment property improvements, don't you have to capitalize those costs to the land rather than depreciate the equipment separately? My accountant told me land improvements get added to the basis of the land and can't be depreciated.