Cost Segregation - Bonus Depreciation on House Hack

[Justin Woods]

I've tried to peruse a lot of the posts on cost segregation but haven't come across anything discuss my specific question/situation. I purchased a SFH in 2022 that I'm in the process of turning into two units with the intent to rent out one of them while continuing to live in the other. I've been researching whether or not doing a cost segregation study would be beneficial and while I don't think I could use the bonus depreciation for 2022 taxes a recent Bigger Pockets Money Podcast (#360) https://www.biggerpockets.com/... talked about carrying forward the paper loss for coming years and the benefit of doing one now as there is still 100% bonus depreciation which will decrease in the coming years. My question is, can I do a study on a home that is currently my primary residence and not yet a rental but will become a rental and I use the paper loss in the future when I need it but have captured the 100% bonus depreciation by doing the cost segregation study in 2022?

I know the easy answer to this is "check with your CPA" but I'm still in the process of working to establish with a real estate specific CPA who better understands the nuances of these topics. Thank you in advance for anyone that can shed some light on this or point me in the direction of good materials to read!

Justin

[Natalie Kolodij]

That's a super super good podcast epsiode- you should probably share it and give it five stars and all that jazz. :) 

You can't utilize bonus depreciation on anything <50% business use. Once you have the property converted to two legal units, it's going to depend on business vs. personal useage. 

So if you do a cost seg once completed on that business portion- it may not qualify for bonus. But you'd still haev the benefit of lots of costs spread across 7 or 15 years vs. 27.5 

Work with a tax professinal becuase this is a tricky situation. 

Also the majority of those costs to covnert to a 2nd unit will need to be capitalized and depreciated, but some things (new appliances, flooring, paint, kitchen cabinets) can be shorter year assets vs. across the full 27.5 and IF it turns out that unit is > 50% you can use bonus as well on those items.