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) 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 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 will tailor draw schedules and interest reserves that maximize bonus depreciation without starving the jobsite of cash.
📞 [Phone] ✉️ [Email] 🌐 LoanFunders.com
Because every dollar you borrow should come back as a deduction—or a profit.