Bonus Depreciation Question

[Jerome Skinner]

Hey all! After listening to the last episode about bonus depreciation, it left me thinking about my home I recently converted form primary to rental. In the episode it was said that bonus depreciation had to be taken in the 1st year, but am I able to take it in the 1st year of conversion from primary to longterm rental property? Or does it have to be the 1st year of purchase?

[Bonnie Griffin Kaake]

Quote from @Jerome Skinner:

Hey all! After listening to the last episode about bonus depreciation, it left me thinking about my home I recently converted form primary to rental. In the episode it was said that bonus depreciation had to be taken in the 1st year, but am I able to take it in the 1st year of conversion from primary to longterm rental property? Or does it have to be the 1st year of purchase?

Jerome, your situation is different than the "normal" advice. Your depreciation will be based on your original purchase price and the date you began listing it for rent/its "occupancy date". Bonus depreciation does not have to be taken in the first year of ownership or occupancy. Each year you wait to do the cost segregation lowers the benefit based on how many years you have already depreciated it using a straight-line method. AND, you will incur a cost for a Change of Accounting form 3115 to change from straight-line to accelerated depreciation. On the other hand, if your income is going to go up significantly in the next year, wait. Bonus depreciation is based on the year of occupancy, not the purchase date unless they are the same.