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Read More » Why This Tax Advantage Just Got Even Better
Gas stations have long been a favorite for net lease investors looking for reliable income and recession-resistant performance. But one of their lesser-known superpowers? Tax efficiency.
Starting January 19, 2025, investors can claim 100% bonus depreciation with no expiration date. And gas stations are one of the few net lease asset types that consistently qualify for it.
Here’s what changed, what it means for your portfolio, and why gas stations remain a compelling investment in 2025.
A Quick History:
- 2017–2022: Investors could deduct 100% of qualifying improvements
- 2023–2024: The benefit phased down—80% in 2023, 60% in 2024
- January 2025: Bonus depreciation was scheduled to drop to 40%—and continue decreasing to zero by 2027
But that changed.
What Happened in 2025?
In 2025, Congress permanently restored 100% bonus depreciation for property placed in service after January 19, 2025.
What this means: Buy a qualifying gas station after that date, and you can deduct the full value of improvements in year one. No phase-outs, no expiration dates.
Key point: Contract date matters more than closing date. Sign before January 19th = 40% depreciation.
Why Gas Stations Qualify (And How to Verify)
Most gas stations with convenience stores qualify for bonus depreciation under IRS rules.
Good news: The IRS has three requirements, and you only need to meet one:
The Three Requirements:
(1) Revenue Test: 50%+ of gross revenues from fuel sales
- How to verify: Review the seller’s income statements for the past 2–3 years
- Documentation needed: P&L statements, sales reports by category
(2) Floor Space Test: 50%+ of floor space used for petroleum marketing - How to verify: Measure fuel pump canopy area vs. total building footprint
- Documentation needed: Site survey, site plans
(3) Size Test: The C-store is 1,400 sq ft or smaller - How to verify: Review building plans or conduct physical measurement
- Documentation needed: Certificate of occupancy, building survey
What This Means for Your Investment:
If your gas station meets one IRS rule, you can deduct most of the cost in year one. This can save you hundreds of thousands in taxes. If not, you’ll fall into the standard 39-year schedule, which stretches that benefit over decades. The difference can be dramatic.
Technical Requirement: You’ll typically need a cost segregation study to maximize your tax benefits. This professional analysis identifies what qualifies and provides the paperwork the IRS requires.
Not sure if your gas station qualifies? A B+E broker can walk you through the process and connect you with the right experts
2025 Scenario: Real-World Examples
Standard Gas Station Purchase:
- Purchase Price: $3 million
- Depreciable Assets: $2.5 million (land excluded)
- Year One Deduction: $2.5 million if 100% bonus depreciation taken
- Tax Savings: Up to $875,000 (assuming 35% combined tax rate)
State Tax Note: State tax treatment varies significantly. Some states conform to federal bonus depreciation rules, while others do not. Always consult with a tax professional familiar with your state’s regulations.
Why Gas Stations Still Work in 2025
Beyond bonus depreciation, here’s why gas stations continue to draw investor interest:
Stable Demand: Fuel remains essential for daily life and supply chain logistics
Broad Pricing Spectrum: Gas stations range from $800K to $15M+, making them accessible across investment sizes
Hands-Off Operations: Triple net leases minimize landlord responsibilities
Location Resilience: Prime real estate on hard corners and high-traffic corridors
FAQ Section
Can I use bonus depreciation on a used gas station?
- Yes, as long as it’s your first time owning that property. Building age doesn’t matter.
What if I signed a PSA before January 19, 2025?
- You’re subject to the 40% depreciation rule for 2025—even if the property closes later. The binding contract date matters more than the closing date. Confirm details with your CPA or attorney.
Can I combine bonus depreciation with a 1031 exchange?
- Generally no—it’s usually one or the other. A 1031 exchange defers taxes, while bonus depreciation accelerates deductions. Confirm with your CPA to determine the optimal strategy for your situation.
What if I’m a passive investor?
- Bonus depreciation can offset passive income or gains from similar passive investments. However, passive activity loss rules may limit your ability to use these deductions against other income types. Confirm details with your CPA or attorney.
What happens if I already own a gas station?
- The new rules only apply to property placed in service after January 19, 2025. However, major improvements or expansions to existing properties may qualify if they meet the threshold requirements.
Can I apply this to refinancing or major renovations?
- Major improvements that substantially extend the property’s useful life or add new functionality may qualify. The key is whether the IRS considers it “new” property under Section 168(k).
How does this interact with other tax incentives?
- You can often combine bonus depreciation with other benefits like opportunity zone investments, but you’ll need to coordinate carefully. Professional tax planning with a CPA or tax attorney is essential to optimize multiple strategies.
Do I need a cost segregation study?
- Though not legally required, most investors hire specialists to perform cost segregation studies—they maximize your deductions and satisfy IRS documentation requirements. The cost typically pays for itself through increased deductions.
Time-Sensitive Opportunity
Sign your contract after January 19, 2025, to qualify for 100% bonus depreciation. Timing matters—this rule only applies to new deals after that date. Timing here isn’t just important—it could impact your tax outcome by hundreds of thousands.
illion property, that’s $1.5 million more in deductions—worth $525,000 in tax savings.
The Bottom Line
With 100% bonus depreciation back, gas stations offer even more tax savings. For investors looking for steady income and strong cash flow, this is a smart time to talk with your CPA or broker.
Thinking about adding a gas station to your portfolio? We’d love to walk you through current listings and help you run the numbers. Let us know where you are in the process—we’re here to support your next step.
Disclaimer
This article is provided for informational purposes only and does not constitute legal, tax, or accounting advice. B+E is not a law firm or accounting firm. Federal and state tax laws are subject to change, and their application can vary based on your individual circumstances. Investors should always confirm details and strategies with their own CPA, attorney, or other qualified advisors before making financial decisions.
Thinking about adding a gas station to your portfolio? A B+E broker can walk you through listings and run the numbers.
Get the 5-min guide to Bonus Depreciation.
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