bonus depreciation help/questions

[Adam Zuar]

My parents bought a short term rental property in Cape Coral Florida in 2021. From what I understand, they can use bonus depreciation once a cost segregation study is done. Unfortunately they did not get a cost segregation study done, or use bonus depreciation while filing their 2021 taxes.

1. Are my parents still eligible for bonus depreciation? and if so, how does using bonus depreciation in "year 2" (i.e. 2022) differ from using bonus depreciation in "year 1" (i.e. 2021)?

2. I heard that once your modified adjusted income is over 100k or 150k that you might not be eligible for bonus depreciation. Is that accurate? Assuming it is accurate, perhaps the best approach would be to put the house in a LLC before doing their 2022 taxes?

Source for this assumption: https://www.therealestatecpa.c...

Lastly, is there a real estate CPA that someone can recommend in the Cape Coral Area?

Thanks!! 

Adam

[Michael Plaks]

@Adam Zuar

Yes, they can still do cost segregation and amend (redo) their 2021 tax return after that. You will not need to deal with Form 3115 mentioned in an earlier response, because it's only been one year. And no, you do not "start" it in the second year, you go back to year 1.

Whether or not it helps your parents is a completely different issue that needs to be examined case-by-case. What Brandon's article refers to is the limits on available deductions for passive losses, based on income. It applies to all deductions combined, including cost segregation. Again, it needs to be evaluated one-on-one before we know whether cost seg helps your parents.

One critical distinction is that they bought a short-term, as opposed to a long-term, rental. The rules are different for STRs, and you may be able to sidestep the limitations on passive losses. They may, in fact, not be passive. Maybe your parents can change a few things to meet the special criteria known as "material participation." Maybe they are better off waiting for 2023. None of this is simple, unfortunately, so please get  with a competent real estate accountant before making your moves.