- The OBBBA reinstates permanent 100% bonus depreciation for qualifying property placed in service after Jan. 19, 2025, reversing a scheduled phase-out.
- Gas stations, convenience stores and car washes are seeing outsized investor demand, with investment sales up about 27% versus roughly 17% for retail overall.
- The rule boosts after-tax returns on equipment-heavy sites (e.g., pumps and tanks), driving pricing up and cap rates down amid competition from REITs and private equity.
- Benefits hinge on strict qualification and documentation, including revenue tests, cost segregation between land and depreciable assets, and ground-lease limits.
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The passage of the OBBBA marks a significant shift in federal tax policy, particularly favoring asset-heavy real property, like gas stations and related facilities. The restoration of full bonus depreciation (100%) effective for property placed in service after January 19, 2025 offers a powerful incentive for investors to accelerate acquisitions and equipment upgrades, rather than phase them in under the old schedule.
Indeed, market behavior reflects this change: according to data from The Boulder Group, investment sales in gas stations, convenience stores, and car washes have increased by ~27% since the law’s enactment—a stronger growth rate than broader retail, whose investment sales rose ~17%. Investors are aggressively closing deals before year-end both to lock in benefits for the 2025 tax year and to optimize risk-adjusted returns in an environment of high interest rates.
However, qualification requirements carve out meaningful limitations: for instance, under IRS code, a convenience store must derive more than 50% of revenue from fuel to be treated as a 15-year property rather than a 39-year one—only then can the full bonus depreciation apply to eligible components. Ground leases usually disqualify structures with respect to eligibility. The land portion, nonqualifying building elements, and the revenue composition must be properly segregated and documented to withstand IRS scrutiny.
Strategically, this creates several implications. Owners who previously deferred investment may now find opportunistic entry into these asset classes more appealing. Operators with older portfolios who have burned through previous depreciation bases are now using bonus depreciation to offset other income or as part of 1031 exchanges. REITs and private equity are pushing pricing aggressively, compressing cap rates, and increasing the cost basis for all buyers.
Open questions remain. How sustainable will yield compression be in the face of higher interest rates and rising operating costs (e.g., maintenance, regulatory compliance)? To what extent will state tax conformity lag (or deviate) from the federal treatment? How will shifting macro-trends (electric-vehicle penetration, fuel demand patterns) impact long-term valuations of gas station real estate once depreciation incentives are fully priced in?
Supporting Notes
- The OBBBA permanently restores 100% bonus depreciation for qualifying property placed in service after January 19, 2025.
- Section 179 expensing limits elevated: deduction limit increased to $2.5 million, phase-out begins at $4 million.
- Since the law passed, gas station, convenience store, and car wash investment sales have surged by 27%, versus a 17% increase in overall retail investment sales.
- Gas stations qualify for first-year full depreciation for everything except land; most equipment (pumps, tanks) is eligible under bonus rules.
- Qualification nuances: convenience stores must have >50% of revenue from petroleum to be treated as 15-year property; ground leases disqualify bonus depreciation; improper cost allocation risks audits.
- Diverse demand sources: new investors, repeat buyers, REITs, private equity, and owners with older portfolios looking to exit or reallocate via 1031 exchanges.