Can I use accelerated depreciation on 1 property to offset capital gains on another

Question

In 2022, I sold a multi-unit property in TN. Also in 2022, I bought a rental property in Ohio. Can I use accelerated depreciation on the new Ohio property to offset the capital gains on the sale of the TN property?

Basit Siddiqi · Answer

Passive losses from rentals can offset passive gains from rentals.

Greg O'Brien · Answer

Basit is correct. So long as both are passive they’ll net.

Natalie Kolodij · Answer

Yes.

No accumulated prior losses on the multi family?

Jimmy Lieu · Answer

Hi Mark, if you need a rockstar CPA or accountant who can help with this, I got you! My accountant is located here in Columbus Ohio and works with a lot of real estate investors, he's awesome!

Jack Gray · Answer

Hi Mark,

I don't know for sure, but there's enough money at stake that it's definitely worth paying a CPA specializing in real estate for an hour or two of their time.

Since tax laws and rules are so darn complicated, I'd ask them to show you the correct section of the IRS code or prior court rulings that deal with this issue so you can be confident.

I'd strongly recommend my CPA.  Message me if you'd like his contact info.

Mark Berardi · Answer

I'm not sure...there may be some accumulated losses to carry forward but it wouldn't be much.

I sold the TN property for $1.85M. Depreciated cost basis was about $390K (Original price $580K). Closing costs / commissions were about $120K. I roughly estimated capital gains of ($1.85M - $390K - $120K) x 20% = $268K. I know this is a rough estimate.

New property in OHIO has about $250K in improvements that qualify for accelerated depreciation. Therefore, I was hoping to only owe about $18K or a bit more in capital gains for the TN property sale.

Can I use accelerated depreciation on 1 property to offset capital gains on another

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