Bonus Depreciation and My CPA’s Advice

[Kyle Swengel]

Hello BP,

I have a fourplex in Tucson that I bought a couple years ago now. I’ve been renovating it and am almost done.

I asked my CPA about bonus depreciation and doing a Cost Seg study on the property so I could get the 80% bonus depreciation but this is what she said:

“Note that I don’t do that kind of work because it requires engineering knowledge that I don’t have. Also, I am not sure it’s worth the costs since you have small homes: the studies are usually reserved for large buildings with multiple units. Depreciation sounds good but it’s reversed when the building is sold so the benefits are probably minor at best. Note that the best tax advantage is expensing the repairs when possible rather than capitalizing and depreciating them.”

I bought my property for $400K and it’s worth close to $600K now. Am I going about this wrong? I thought that taking bonus depreciation was a no brainer? And most people I talk to say I should do it. What am I not considering and why is my CPA not wanting to go for it? Is my building really not expensive or big enough to where it makes sense?

Any help would be great. Thanks!

[Michael Plaks]

@Kyle Swengel

1 - CPAs don't do cost segregation studies. She is correct that it requires specialized knowledge. So we refer clients to companies/experts that specialize in cost segregation: @Bernard Reisz, @Yonah Weiss or @Julio Gonzalez can all help you. We then incorporate their results into your tax return.

2 - The price point is subjective, but it certainly can make sense for a $400-600k 4-plex if you're planning to keep it for a few years.

3 - Most importantly - understand how cost seg actually works: https://www.biggerpockets.com/...