Active VS Passive and Cost Segregation

[Stefan Hirniak]

Hi BP!

Happy Friday.

I’ve got a 2 part question for the forum:

1) Can I take bonus depreciation through a cost seg study if I’m not classified as an active investor?  Doing a mid term rental in Texas with solar and was hoping to take the depreciation before the % decrease.

2) Any suggestions on becoming active VS passive. I have a W2 but my wife doesn't work and we are looking to scale. We currently manage our 7 SFH alone but our CPA isn't comfortable with it yet.

Not looking for tax advise just suggestions and opinions.  Thanks everyone and have a great weekend!

stefan

[Daniel Murphy]

Ashish is correct, bonus depreciation is not optional. If you do a cost seg study, you get bonus deprecation. How it flows through to your tax return is the next set of questions / situations. 

First, either you or your wife must materially participate, AND, your average rental day must be 7 days or less to have the deprecation go against your active income for the "str loophole."  

OR, like you say you're a mid term rental, you must provide substantial services.  IE- daily linens, food service etc. 
OR, you must be a real estate professional. My understanding is that if you have a regular job, it's almost impossible to sufficiently claim REPS.  

I'm not a CPA, but I have been digging into cost segs very deeply recently.  

My experience with CPA's, cost segs & interpretations: Tax code & tax forms are fairly formulaic.  "multiply line 6 by 50% & enter on line 7" type of thing.  However, when you get to forms 8582 & 4562, Passive Activity Losses & Deprecation, this is when the formula's tend to stop and tax professional interpretation steps in. As a result, you'll likely get a different answer from multiple CPA's on deprecation & active/passive rules.  
You may consider getting a second opinion (or third).