One of the most compelling — and misunderstood — tax strategies gaining traction: buying operating businesses with heavy equipment and depreciable assets.
Car washes, gas stations, convenience stores, and laundromats are uniquely positioned to benefit from the OBBA’s restoration of 100% bonus depreciation.
Here’s why:
The IRS explicitly classifies car wash buildings under Asset Class 57.1 as 15-year property. The building is considered “facilitative” to the operation — essentially a shell for the mechanical equipment — and is retired along with that equipment. Gas stations qualify for 15-year recovery if petroleum sales exceed 50% of revenue. That means you can potentially write off the full purchase price (minus land) in year one.
A $2.5M car wash with $625K allocated to land could generate $1.875M in first-year depreciation. At a 37% federal rate, that’s nearly $700K back in your pocket. In some cases, the IRS is effectively financing your down payment.
But here’s what the pitch decks don’t tell you:
The tax tail cannot wag the investment dog. If the only reason a deal works is the deduction, the IRS can attack it under economic substance doctrine. The business must stand on its own.
Material participation is the make-or-break factor. To use these losses against W-2 or other active income, you generally need to materially participate — spending 500+ hours a year if you hire a manager, or 100+ hours if nobody else works more than you. Reviewing financial statements or “keeping an eye on things” doesn’t count.
And there’s the Excess Business Loss cap. Even with perfect structuring, IRC 461(l) limits how much loss offsets non-business income each year. The excess becomes an NOL carryforward — helpful, but not the same as eliminating your current-year tax bill.
When does this make sense?
- You have significant W-2 or business income you need to offset
- You’re willing to be genuinely involved in operations (or can satisfy material participation through a combination of administrative and operational work)
- You understand you’re buying a real business with real risks — maintenance, environmental compliance, employee management
- You’ve modeled the multi-year tax impact, not just year one
- The investment makes economic sense even without the tax benefit
This strategy is most powerful for high-earning professionals — surgeons, tech executives exercising options, fund managers with a big carry year — who need a large deduction in a specific year. But the best outcomes come from people who treat this as a long-term business investment that also has great tax characteristics. Not the other way around.
Meet the Authors
David Snider
David Snider is the Founder & CEO of Harness, a platform to power entrepreneurial tax advisors & their clients. Harness was recognized by Inc Magazine as one of the 200 fastest growing companies in the U.S. David incubated Harness as an executive-in-residence at Bain Capital Ventures. Previously he served as COO & CFO of Compass, a real estate tech company that he helped grow from pre-launch to a valuation of $1.8 billion. David was an investor at Bain Capital private equity, where he completed investments worth over $2 billion as well as the IPO of Sensata on the NYSE. He is the author of Money Makers, published by Macmillan.
This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, the reader is encouraged to consult with the professional advisor of their choosing.
