Bonus depreciation on primary converted to rental

[Ajul Shah]

Hi there, hope someone can help me with this question. I have had conflicting advice from cost segregation specialist versus our CPA. If a primary residence is converted to a long-term rental property, can bonus depreciation still be claimed in the first year? Our CPA says yes but the cost segregation  specialist says bonus depreciation does not apply to primary converted to rental. Does anyone have any advice?

[Ajul Shah]

Here is what I was sent for reference, in case anyone has seen this. I’m concerned about the first bullet point.

[Zachary Jensen]

Hey Ajul, that bonus depreciation is no longer at 100%. in addition to that, you need to qualify as REPS or be using the short term rental loophole to even be able to take advantage of that deprecation against your active income. I would strongly recommend linking up with a real estate focused accountant to get that sorted out. best of luck! 

[Michael Plaks]

Quote from @Ajul Shah:

If a primary residence is converted to a long-term rental property, can bonus depreciation still be claimed in the first year? Our CPA says yes but the cost segregation  specialist says bonus depreciation does not apply to primary converted to rental. 

Yes, you can apply bonus depreciation to a converted property, with some caveats:
- it will be based on your original purchase price, not today's value
- bonus depreciation for 2024 is 60%, not 100%
- most importantly, you may or may not benefit from cost segregation/bonus depreciation

Read this: https://www.biggerpockets.com/forums/51/topics/1075919-five-...

[Mohamed Youssef]

If you have lived in the property for more than 14 days or more than 10% of the rental days then yes, no rental losses are allowed (i.e. bonus depreciation). You can find this under section 280 A

[Michael Plaks]

If you have lived in the property for more than 14 days or more than 10% of the rental days then yes, no rental losses are allowed (i.e. bonus depreciation). You can find this under section 280 A

This rule does not apply to properties converted into rental use 

[Zachary Jensen]

Quote from @Michael Plaks:

If you have lived in the property for more than 14 days or more than 10% of the rental days then yes, no rental losses are allowed (i.e. bonus depreciation). You can find this under section 280 A

This rule does not apply to properties converted into rental use 

I think thats actually why they call it the "STR loophole" right?

[Ajul Shah]

Haha this is why this situation is so confusing - many people with differing interpretations! Let me give a little more context on the situation

I'm aware of current 60% bonus depreciation, and my wife is REPS. We will be theoretically converting this unit to a long term rental (not STR) so we won't qualify for the STR loophole. Specifically want to know if converting to LTR will allow for bonus depreciation which we would use to offset w2 based on wife REPS status.

thanks for the advice!