Accelerated & Bonus Depreciation in Opportunity Zones

Sourced from 475+ industry emails, investment memos, and regulatory materials.

Overview

OZ operating businesses use 100% bonus depreciation (§168(k)) without cost segregation studies. Their assets are natively short-life personal property.

MACRS vs. Bonus Depreciation

Method	Deduction Timing	Impact
Standard MACRS	Spread over 5, 7, or 15 years	Front-loaded, incremental
Bonus Depreciation §168(k)	100% in Year 1	Maximum — full Year 1 deduction

Qualifying Asset Classes (MACRS ≤ 20 Years)

Asset	MACRS Life	§168(k)?
Office machinery & tech	5 years	✅
Manufacturing equipment	7 years	✅
Water filtration systems	7 years	✅
Renewable energy systems	5–7 years	✅
Land improvements	15 years	✅

The Four-Layer OZ Tax Stack


Layer 1: Capital Gains Deferral → No tax for 5 years
Layer 2: Basis Step-Up (10% or 30% Rural) → Permanent reduction in taxable gain
Layer 3: Bonus Depreciation (§168(k)) → Year 1 deduction offsets other income
Layer 4: 10-Year Exclusion → 100% of appreciation tax-free at exit

Real Numeric Examples

Project	Investment	§168(k) Deduction
Advanced Manufacturing Facility	$40M raised	$22M in Year 1
Water Infrastructure Project	$10M	$10M in Year 1
Tech Manufacturing Platform	$25M	$25M in Year 1

10-Year Scenario: OZ vs. Non-OZ ($1M at 15% IRR)

Scenario	Year-5 Tax	Exit Tax (Yr 10)	Net After 10 Years
Non-OZ	—	$1,043,000	$2,530,385
Standard OZ	$238,000	$0	$3,807,558
Discounted OZ	$114,240	$0	$3,931,318

Standard OZ investor nets $1.28M more than Non-OZ — a 50.5% improvement.

Operating Business Tax Checklist

Confirm QOZB holds primarily depreciable tangible property (not real estate)
Verify all targeted assets have MACRS life ≤ 20 years
Confirm assets placed in service within the OZ
Coordinate with tax counsel on §469 passive activity rules
Determine if target zone qualifies as Rural OZ for 30% step-up

Content sourced from the OZ 2.0 Resource Center — 475+ industry emails, investment memos, and regulatory guidance.