How Links Car Wash Uses Bonus Depreciation to Maximize Investor Returns

Links Car Wash is well-positioned to leverage federal tax incentives to optimize its express car wash operations. Bonus depreciation can be particularly advantageous for a capital-intensive business like express car washes, where investments in equipment and facilities are substantial. This article explains how bonus depreciation strengthens our investment model at Links Car Wash, LLC. We’ll cover the foundational changes introduced by the Tax Cuts and Jobs Act of 2017 (TCJA), the subsequent phase-out schedule, and the recent reinstatement of full bonus depreciation under the One Big Beautiful Bill Act of 2025 (OBBBA). Note that while this is based on current federal tax rules as of August 2025, tax laws can change, and professional consultation is recommended for your specific filings. 

What Is Bonus Depreciation? 

Links investors benefit from immediate tax deductions through bonus depreciation—allowing most of their investment to be written off in Year 1, reducing taxable income and enhancing cash flow.¹  

Unlike standard depreciation, which spreads the cost recovery over the asset’s useful life (e.g., 5 years for equipment or 39 years for buildings), bonus depreciation accelerates tax savings by providing an upfront deduction. This reduces taxable income immediately, improving cash flow for our investors. Qualifying property generally includes: 

• Tangible personal property with a MACRS recovery period of 20 years or less (e.g., machinery, equipment, and vehicles). 

• Qualified improvement property (QIP), such as interior improvements to nonresidential real property (e.g., HVAC systems or roofing). 

• Certain computer software, water utility property, and film/theatrical productions. 

Property must be new or used (as expanded under TCJA), acquired by purchase (not inheritance or gift), and placed in service during the tax year. Exclusions include land, inventory, and property used outside the U.S. more than 50% of the time. 

For Links Car Wash, this incentive is especially valuable because our operations involve heavy investment in specialized equipment and improvements. Examples of qualifying assets for our business might include: 

• Car wash tunnels, conveyors, blowers, and vacuum systems (typically 5- or 7-year MACRS property). 

• Land improvements like driveways, signage, and drainage systems -(15-year property). 

• Interior building enhancements, such as upgraded electrical or plumbing systems for the wash bays (QIP, eligible for bonus if meeting criteria). 

Cost segregation studies can further optimize this for Links Car Wash by reclassifying portions of our facilities (e.g., 65%–100% of a car wash’s value) into shorter-life categories eligible for bonus depreciation, rather than lumping everything under the 39-year building category. In some cases, the IRS views nearly the entire car wash structure as eligible due to its specialized use. 

The Tax Cuts and Jobs Act of 2017: Expanding Bonus Depreciation 

The TCJA, enacted in December 2017, significantly enhanced bonus depreciation to stimulate business investment. Prior to TCJA, bonus depreciation was temporary and varied (e.g., 50% under earlier extensions), but it often lapsed or required congressional renewal. 

Key changes under TCJA: 

• Increased the bonus rate to 100% for qualified property placed in service after September 27, 2017, and before January 1, 2023. 

• Expanded eligibility to include used property (previously limited to new), broadening its appeal for acquisitions like buying an existing car wash site for Links Car Wash. 

• Made QIP eligible, which benefited owners like Links Car Wash making interior upgrades to facilities. 

• Allowed the deduction for property with longer production periods (e.g., custom-built car wash equipment) if certain timelines were met. 

For Links Car Wash, this meant you could deduct the full cost of new tunnels, automated systems, or site improvements in Year 1, rather than over 5–15 years. This was a game-changer for our industry, enabling faster expansion and mergers/acquisitions. For instance, if Links Car Wash invested $1 million in qualifying equipment, you could claim a $1 million deduction, potentially saving $210,000–$370,000 in federal taxes (depending on your tax bracket). 

The Phase-Out Schedule Under TCJA 

To make the tax cuts revenue-neutral over time, TCJA included a phase-out of 100% bonus depreciation starting in 2023: 

• 80% for property placed in service in 2023. 

• 60% in 2024. 

• 40% in 2025. 

• 20% in 2026. 

• 0% (eliminated) in 2027 and beyond. 

This schedule applied unless extended by future legislation. For 2025, without intervention, Links Car Wash would have been limited to a 40% first-year deduction, with the remainder depreciated under MACRS rules. For our operations, this phase-out could have slowed investment, as partial deductions reduce the incentive for large capital outlays like new sites or upgrades. 

The One Big Beautiful Bill Act of 2025: Reinstatement and Enhancements 

Enacted in July 2025, the OBBBA (H.R. 1, 119th Congress) represents a major tax reform package aimed at extending and expanding TCJA provisions. Often referred to colloquially as the “big beautiful bill,” it addresses expiring TCJA elements and introduces new incentives. 

Regarding bonus depreciation, OBBBA reinstates 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. This effectively overrides the 40% phase-out for 2025, providing full expensing similar to the TCJA’s peak years. The reinstatement is retroactive only to January 19, 2025, so assets placed in service earlier in the year may still fall under the 40% rule unless they qualify under transition provisions. 

For Links Car Wash, this restoration should reignite investment by allowing full write-offs for new builds or acquisitions, potentially boosting our M&A activity and greenfield development. 

Application to Links Car Wash: Practical Considerations 

Links Car Wash and its investors stand to gain substantially from bonus depreciation due to our asset mix. A typical setup for one of our locations might include: 

• Equipment (5-7 years): 100% deductible under bonus (e.g., automated brushes, chemical dispensers). 

• Land Improvements (15 years): Eligible, such as paved lots or retaining walls. 

• Building Components: Via cost segregation, elements like specialized plumbing or electrical can be reclassified as personal property or QIP for bonus eligibility. 

To maximize benefits for Links Car Wash: 

1. Conduct a cost segregation study to identify and accelerate depreciation on shorter-life assets across our sites. 

2. Ensure property is “placed in service” (ready and available for use) within the qualifying period. 

Recapture rules apply if an asset is sold before full depreciation, treating the bonus as ordinary income. 

Investor Benefits: Leveraging Bonus Depreciation for Enhanced Returns 

At Links Car Wash, bonus depreciation is strategically utilized to enhance returns for investors by accelerating tax deductions, which can significantly reduce taxable income and improve after-tax cash flows. A key metric we target is a 1.8 depreciation multiple, meaning we aim to generate $1.80 in first-year deductions for every $1.00 of investor equity. For example, if an investor contributes $100,000, our goal is to structure the investment such that they receive $180,000 in bonus depreciation deductions in Year 1. This is achieved through the high eligibility of car wash assets for 100% bonus depreciation, often covering nearly the entire purchase price minus non-depreciable land value. 

Using leverage—financing purchases with debt—further amplifies this depreciation multiple. When acquiring a car wash, the bonus depreciation deduction applies to the full cost basis of the qualifying assets, regardless of how much is financed with debt. This means investors can deduct the entire eligible amount while only committing a portion of the total cost as equity. For instance, if a $1 million car wash (with $900,000 in depreciable assets) is purchased with 50% debt ($500,000 loan) and 50% equity ($500,000), the $900,000 deduction on $500,000 equity yields a 1.8x multiple. Higher leverage ratios (e.g., 60-70% debt, common in stable cash-flow businesses like car washes) can push this multiple even higher, as the equity denominator decreases while the deduction remains tied to the full asset cost. This strategy not only boosts investor returns through deferred taxes but also supports portfolio growth by freeing up capital for additional investments. 

Conclusion 

Bonus depreciation, supercharged by TCJA and revived by OBBBA, offers Links Car Wash a powerful tool for tax efficiency and growth. By allowing immediate deductions on key assets, it frees up capital in the competitive express car wash business. By maximizing bonus depreciation, Links delivers stronger after-tax returns and fuels rapid portfolio growth—creating long-term value for our investor community. 

Disclaimer: This article is for informational purposes only and is not intended as tax advice. Readers should not rely on this information for making tax-related decisions and should consult their own tax professionals for advice tailored to their specific circumstances. 

Authored by: Joe F. Teague, Jr., Esq., CEO of Links Car Wash