Many investors overlook one of the most powerful advantages of acquiring a gas station with an attached convenience store: the ability to use accelerated depreciation and bonus depreciation to dramatically reduce taxable income in the first year.
If the purchase is structured correctly, buyers can write off a large portion of the property’s value in year one rather than spreading deductions over decades. That boost in after-tax cash flow can significantly improve ROI and payback.
Why Gas Stations and C-Stores Are Unique
Most commercial buildings are depreciated over 39 years. Gas stations and convenience stores, however, qualify for special treatment because they are classified as retail motor fuel outlets if specific criteria are met.
When a property qualifies, the building and improvements can be depreciated over 15 years instead of 39, which makes them eligible for bonus depreciation.
That’s a big deal, because bonus depreciation allows investors to deduct a large percentage — often 100% depending on timing — of those 15-year assets in the first year.
When a Gas Station / C-Store Qualifies for the 15-Year Rule
A property is generally treated as a retail motor fuel outlet if any of the following apply:
- At least half of gross revenue comes from fuel sales
- At least half of the floor area is dedicated to petroleum-marketing activity (pumps, canopies, tank areas, etc.)
- The convenience-store building is 1,400 square feet or smaller
If the property meets any of these tests, the building typically qualifies as 15-year property, opening the door to bonus depreciation.
If not, the building stays 39-year, but investors can still carve out significant 5-year, 7-year, and 15-year components through a cost segregation study.
Where Bonus Depreciation Comes In
Bonus depreciation lets a taxpayer immediately deduct a large percentage of the cost of qualifying property in year one rather than over time. When the building falls into the 15-year category and the remaining assets are identified through cost segregation, buyers can often deduct 25% to 60% of their purchase price in the first year, depending on deal structure and asset allocation.
That includes:
- Fuel pumps and dispensing systems
- Signage and exterior lighting
- Parking lot and site improvements
- Security and camera systems
- Interior finishes tied to retail/commercial use
- Electrical and HVAC dedicated to non-building systems
- Canopies and certain structural components supporting pump activity
This is why gas stations and convenience stores are frequently considered high-yield targets for depreciation-driven tax strategy.
Quick Example
A buyer purchases a gas station + convenience store for $4,000,000.
- Land (not depreciable) = $800,000
- Remaining depreciable property = $3,200,000
If the building meets the retail motor fuel outlet test, the full $3,200,000 may qualify for 15-year property.
If placed in service in a bonus-eligible year, the investor can potentially deduct the full $3,200,000 in year one.
By reducing taxable income by millions, the investor may unlock hundreds of thousands of dollars in tax savings and liquidity — capital that can be used for improvements, operating capital, or the next acquisition.
What If the Property Doesn’t Meet the 15-Year Test?
You still win.
A cost segregation study can reclassify significant portions of the property into shorter-life categories eligible for bonus depreciation, often capturing:
- 5-year personal property
- 7-year equipment and fixtures
- 15-year land improvements
Even without 15-year building treatment, these projects often produce 25%–40% first-year depreciation.
Bigger Picture Tax Planning Considerations
A few items smart investors account for:
- Material participation and passive activity rules determine whether losses can offset W-2 income
- Some states don’t follow federal bonus depreciation rules, so planning by state matters
- Depreciation recapture will apply when you sell, so modeling exit tax outcomes is valuable
- Timing matters — acquisition and placed-in-service dates can affect bonus eligibility
When buyers understand the rules ahead of closing, they’re in the strongest position to maximize benefit.
Final Takeaway
With proper due diligence, depreciation planning, and cost segregation, gas station and convenience store acquisitions can generate extraordinary first-year tax advantages that meaningfully enhance investment returns.
If you’re evaluating or preparing to acquire one of these properties, it makes sense to assess depreciation strategy before closing rather than after. The right structure can reduce tax liability, improve cash flow, and accelerate scalability.
Want a Depreciation Projection Before You Buy?
Our team performs complimentary first-pass depreciation benefit analyses for investors evaluating gas stations or C-stores. We identify the expected first-year tax savings, bonus depreciation impact, and long-term cash-flow value so you can make an informed decision before placing an offer or finalizing financing.
If you’d like to run numbers on a deal you’re analyzing, just share:
- Address or OM
- Purchase price
- Estimated closing timeline
- Any upgrades planned after acquisition
We’ll prepare a clear projection you can use for planning, financing, and tax strategy discussions.
