Interest Deduction & §163(j): The Developer’s Dilemma

Developers can elect to be treated as a real property trade or business, allowing full interest deductions — but it comes with a trade-off.

Pros: Deduct 100% of interest expense. Cons: Must use ADS depreciation (longer lives) and lose bonus depreciation.

When It Makes Sense: For long-term development or hold projects with significant debt.

💡 Key Takeaway: Model both options before electing — it’s usually irrevocable.

⚠️ This blog is for informational purposes only and does not constitute tax, legal, or accounting advice. Please consult your CPA for guidance specific to your situation.