Bonus Depreciation 2025: A Guide to Tax Savings with C-Store Investing

From a tax perspective, they occupy a sweet spot in the real estate world. Unlike most retail or commercial properties, C-stores often qualify as "retail motor fuel outlets," which means they can be depreciated over 15 years instead of the standard 39. This special treatment makes them eligible for accelerated depreciation, and specifically, bonus depreciation – a benefit that just became far more powerful under the One Big Beautiful Bill Act (OBBB). For real estate investors, a cost segregation study can maximize these benefits.

For investors seeking assets with predictable cash flow and significant upfront tax advantages, C-stores like 7-11, Sheetz, Wawa, Buc-ees, and SQRL are uniquely positioned to potentially deliver both stability and tax efficiency. In addition to the immediate tax benefits from 100% bonus depreciation, the opportunity for value creation is significant because the c-store market is highly disjointed with 60% of operators operating just one location with no backing from a larger corporate structure.

What Exactly is Bonus Depreciation?

Bonus depreciation is a tax strategy that allows for accelerated depreciation of certain business assets, letting companies or investors deduct a large portion of qualified property in the year it is placed in service. For qualified property acquired and placed in service after January 19, 2025, the bonus depreciation rate has been permanently reinstated to 100%.

Originally introduced in the Tax Cuts and Jobs Act (TCJA) of 2017, bonus depreciation was scheduled to phase out by 2027. However, in July 2025 the OBBB permanently reinstated 100% bonus depreciation, making the previous bonus depreciation phase out schedule a thing of the past.

This means that investors who missed out after 2022 have a new chance to take advantage of bonus depreciation.

Just How Does Bonus Depreciation Work Today?

Under the new rules:

• • 100% of the cost of qualifying assets may be deducted immediately.
• • Taxpayers also have the option to elect a 40% or 60% deduction, instead of taking the full 100%, if they prefer to smooth deductions across multiple years.
• • The prior TCJA phase-out schedule (80% in 2023, 60% in 2024, 40% in 2025, etc.) no longer applies.

Investors now have the certainty that they will be able to depreciate 100% and the flexibility for long-term planning if they don't need 100% depreciation in year 1.

What Assets Qualify for Bonus Depreciation?

Qualified property generally includes assets with a recovery period of 20 years or less, such as:

• • Vehicles, equipment, furniture, fixtures, and machinery
• • Qualified improvement property (QIP) – interior improvements to nonresidential buildings made after the property is placed in service
• • Computer software
• • Certain "listed property" used primarily for business (e.g., vehicles, cameras)
• • Costs of qualified film, TV, or live theatrical productions

For real estate investors, bonus depreciation is often unlocked through cost segregation studies, which reclassify building components into shorter-lived categories eligible for accelerated write-offs. We see this a lot in multifamily properties.

How Cost Segregation Unlocks Tax Benefits

Generally, real estate assets with a depreciation period of 20 years or less qualify for bonus depreciation. A cost segregation study is an engineering-based analysis that identifies various components of a building and reclassifies them into shorter depreciable lives. For example, fixtures, equipment, and land improvements can be reclassified from the standard 39-year commercial property life to 5, 7, or 15-year lives. This makes them eligible for accelerated – and now 100% bonus – depreciation, providing a significant upfront tax deduction.

Why are C-Stores Different? The "Retail Motor Fuel Outlet" Advantage

C-stores enjoy a unique position in the tax code. Many are designated as retail motor fuel outlets which means the entire building may be treated as 15-year property – and therefore eligible for bonus depreciation. This is a unique benefit that makes c-store investing particularly attractive from a tax perspective.

Normally, commercial real estate is depreciated over 39 years, but C-stores are different. To qualify as a retail motor fuel outlet, a C-store must meet one of the following IRS tests:

• • 50% or more of gross revenues are from petroleum sales, or
• • 50% or more of floor space is devoted to petroleum marketing, or
• • The building is 1,400 square feet or less, regardless of other factors.

Because of this designation, investors can benefit from immediate deductions not available to many other asset types.

Real-Life Example

This flexibility is a game-changer, allowing investors to align tax benefits with their broader financial strategies. Make sure to consult your CPA to determine which option is most beneficial for your situation.

The Case for C-Store Investing

The 2023 narrative that bonus depreciation was "sunsetting" is now outdated. Thanks to the OBBB: 100% bonus depreciation is permanent going forward. C-stores remain uniquely positioned to qualify due to their retail motor fuel outlet status.

Beyond the immediate tax-benefits, real estate funds that focus on c-store acquisition often have unique value-add opportunities not found in other retail assets. The market is very fragmented. The National Association of Convenience Stores (NACS) reports that ~60% of U.S. c-stores are owned by single-store operators. Many of these are independently branded or unbranded fuel stations, meaning they aren't tied to major fuel brands (Shell, Exxon, Chevron) or national c-store brands (7-Eleven, Circle K). The best c-store fund sponsors focus on acquiring assets that they can rebrand under strong national franchise flags to increase consumer appeal. Another value-add strategy we see is a focus on sale-leaseback transactions that allow them to implement long-term NNN leases to stabilize potential cash-flow to investors.

Through our curated marketplace, we offer investments that can potentially qualify for bonus depreciation benefits. If you would like to learn more, reach out to our team at Anchor1031 for more information about opportunities that may provide potential tax benefits. You can schedule a call or contact us directly. Each investor's tax situation is different so please speak to your CPA prior to making any tax-related investment decisions.