Depreciation Meets Draw Schedule: Tax-Smart Structuring for Ground-Up Clients
An accountant-friendly guide to timing construction draws, bonus depreciation, and cost segregation—so every dollar of equity, debt, and IRS benefit works in perfect sync.
1 | Why CPAs Should Care About the Draw Calendar
Most builders treat the lender’s draw schedule as a pure cash-flow tool: pour footing, call inspector, get wire. But for ground-up investors, the timing of those draws controls when hard-costs convert into depreciable basis—and therefore when your client can deduct them.
| Expense Type | When It Becomes Depreciable | Tax Lever Available |
| Land | Never (basis only) | Step-up at exit |
| Hard Costs (slab, framing, MEP) | As placed-in-service (CO) | Regular or bonus §168 depreciation |
| Soft Costs (permit, architect, interest) | Capitalized into basis—same date as hard costs | 15-yr amortization or cost-seg |
| FF&E (appliances, landscaping) | Upon installation | 100 % bonus thru 2025 → 80 % in 2026 |
Key insight: If a project drags three extra months, bonus-eligible FF&E purchased in January might slip into the next tax year—costing your client a 20 % bonus step-down. Aligning draws with the tax calendar matters.
2 | 2025 Bonus Depreciation Countdown
| Year Placed-in-Service | Bonus % on 5-, 7-, 15-yr Property |
| 2025 | 100 % |
| 2026 | 80 % |
| 2027 | 60 % |
| 2028 | 40 % |
| 2029 | 20 % |
Takeaway: Projects breaking ground mid-2024 need a 12-month sprint to capture full 100 % bonus before 31 Dec 2025.
3 | Structuring the Draw Schedule for Tax Efficiency
| Month | Construction Milestone | Draw % | Tax Play |
| 0 | Land close + permits | 10 % | Land basis segregated early—non-depreciable. |
| 1–2 | Foundation & slab | 15 % | Capitalized hard cost; no depreciation yet. |
| 3–5 | Framing & roof dry-in | 25 % | Engage cost-seg firm now; engineers need mid-build photos. |
| 6–7 | MEP rough-in | 15 % | Tag electrical runs & HVAC units → 5-yr class. |
| 8 | Insulation & drywall | 10 % | Capture §179D energy-credit paperwork if applicable. |
| 9 | Exterior finishes | 10 % | Landscape invoices dated before 31 Dec for bonus. |
| 10–11 | Cabinets, appliances, floor | 10 % | FF&E draw timed >60 days pre-year-end to allow inspection & CO. |
| 12 | Punch & CO | 5 % | Building placed-in-service—full depreciation clock starts. |
Key CPA-lender hack: Ask the lender (👋 loanfunders.com/wp/) to front-load FF&E draw if supplier offers early delivery. Bonus depreciation depends on installation date, not payment date.
4 | Interest Reserve & Carry Cost Capitalization
Private ground-up loans usually escrow 9–12 months of interest. Under §263A, construction period interest capitalizes into basis until the asset is placed in service. That means:
- Larger basis → More depreciation once CO hits.
- Interest paid after CO becomes an immediate expense under §163.
CPA tip: Keep a separate amortization schedule of capitalized vs. expensed interest—auditors love clean breakout.
5 | Cost Segregation in 2025—Why Mid-Build Photos Matter
The engineer reallocates components into 5-, 7-, and 15-year buckets. Drywall hides the gold. Insist on:
- Framing & truss photos (qualify for 7-yr)
- Underground plumbing & electrical (15-yr)
- HVAC & rooftop units before shroud install (5-yr)
Upload to a shared folder with the cost-seg firm by Month 6. Lender inspections are a perfect, timestamped source.
6 | loanfunders.com/wp/ Draw Mechanics—Built for Tax Pros
| Feature | Tax Advantage |
| 48-Hour Draw Funding | Appliance invoices paid and installed before 12-31 cutoff. |
| Digital Photo Inspection | Automatically archives geo-stamped images for cost-seg. |
| Interest Reserve Option | Cleaner §263A tracking; borrower doesn’t write checks. |
| Progress Reporting CSV | Imports into your fixed-asset software—no manual entries. |
7 | Case Illustration—2,200 sq ft Spec, Closed Q1 2024
| Metric | Slipped Timeline | Tax-Smart Timeline |
| CO Date | 15 Feb 2026 | 15 Dec 2025 |
| Bonus-Eligible Basis (5- & 15-yr) | $112 K @ 80 % | $112 K @ 100 % |
| Year-1 Depreciation | $89.6 K | $112 K |
| Tax Savings (32 % bracket) | $28.7 K | $35.8 K (+$7.1 K) |
A four-week acceleration saved $7,100—almost equal to one monthly draw.
8 | End-of-Year Action Plan for CPAs & Builders
- Review Draw Calendar vs. Tax Calendar—identify bonus-sensitive items.
- Coordinate with Lender to front-fund FF&E draws if needed.
- Schedule Cost-Seg Photo Day during framing.
- Track Interest Reserve Utilization—journal capitalized vs. expensed.
- Run Year-End Depreciation Preview—adjust delivery/installation dates if savings justify.
Ready to Sync Financing with Tax Strategy?
Send us your build budget and target CO date—loanfunders.com/wp/ will tailor draw schedules and interest reserves that maximize bonus depreciation without starving the jobsite of cash.
📞 [Phone] ✉️ [Email] 🌐 loanfunders.com/wp/
Because every dollar you borrow should come back as a deduction—or a profit.