Bonus depreciation on a project split between 2 years

[Johnathan Simeroth]

BP community,

I'm looking for advice on how tax year timing affects my ability to take bonus depreciation and/or "expense" some of my capital improvements.

I purchased a duplex that needed a lot of work in 2021. I started a rehab immediately that will wrap up in early 2022. My payments to my contractor therefore started in 2021 (~130k) and I'll make the final payment in 2022 (~60k). I plan to use this property as a short term/vacation rental.

If the property won't be rentable/placed in service until 2022, I just want to confirm that I am still able to take some portion (as determined by cost seg study) of the 130k invested in 2021 as bonus depreciation in tax year 2022, right?

[Ashish Acharya]

Originally posted by @Johnathan Simeroth:

BP community,

I'm looking for advice on how tax year timing affects my ability to take bonus depreciation and/or "expense" some of my capital improvements.

I purchased a duplex that needed a lot of work in 2021. I started a rehab immediately that will wrap up in early 2022. My payments to my contractor therefore started in 2021 (~130k) and I'll make the final payment in 2022 (~60k). I plan to use this property as a short term/vacation rental.

If the property won't be rentable/placed in service until 2022, I just want to confirm that I am still able to take some portion (as determined by cost seg study) of the 130k invested in 2021 as bonus depreciation in tax year 2022, right?

Yes, but remember not the entire rehab will be eligible for bonus depreciation.