does Cost Segregation apply to Residential/Multifamily??

[Ashley Garner]

I have been told by some CPA's that the cost segregation and bonus depreciation tax codes do NOT apply to Residential and that multifamily is Residential.  Trying to find out if multifamily can take advantage of cost segregation and bonus depreciation?  (or maybe are cost segregation and bonus depreciation two different things?  and if so do both apply to multifamily?).

1 - Next week I am closing on the purchase of a multifamily built in 2006.  Purchase price is $680,000.  Should I be doing something BEFORE the purchase closes in order to take advantage of cost seg and bonus depreciation?

2 - in 2018 bought multifamily built in 2000 for $1.2 million, put $750,000 into renovation since the purchase (most of which was spent in 2019).  So far I have done nothing regarding cost segregation or bonus depreciation...AM I LEAVING MONEY ON THE TABLE?

Thanks in advance for any advice!!

ASHLEY

[Ari Lasky]

Hi Ashley, The answer is yes you CAN do a cost segregation on a residential property. As long as it is an income producing property that is being depreciated, you can do a cost segregation study.

Regarding bonus depreciation: Bonus depreciation is relevant to certain assets placed in service at certain times. A cost segregation study is necessary in order to identify which assets are eligible.

1) You only have to do a CS study prior to filling your tax return. No need to worry about it now. Close the deal then give me a call :-)

2)It depends on the scope of work you did but most likely, yes, you are leaving money on the table. You can always do a look back study to recoup that depreciation. It’s a little more complicated but message me if you would like to discuss more at length.