2022 Tax file question for Rental Property Depreciation

[Kevin Kim]

Hello

I have 3 rental properties and want to double check for depreciation best practices.

Rental 1 Net income : -13,500 (Due to a lot of repair/renovation)

Rental 2 Net income : 6,000

Rental 3: 3,000

So i thought, I don't have to use "depreciation" since my all total rental income was negative (-,4.500) (I don't want to pay a lot of capital gain taxes when i sell my home although 1031 exchange is possible...)

But my CPA says this year negative loss (-4,500) will be carry over. Eventually, if i sell the rental home, I can use the carried over loss to deduct capital gain. My CPA recommends to use depreciation every year as even if there will be negative rental income (due to depreciation), it will carry over.

I am in new this rental business and appreciate if someone can advise best practice for depreciation. 

[Sean O'Keefe]

@Kevin Kim Depreciation is required by the IRS once you've "Placed the property in service" (this is when you've made the property ready and available, not necessarily when you have a tenant occupy the property).

Yes, unused losses may get carried forward to future years and offset capital gains on sale, but keep in mind there is also depreciation recapture. 

If you "materially participate" in the property you may be able to offset W-2 income with losses from rental property, but this depends on a # of factors including type of rental (STR, LTR, etc), level of taxable income, and more.

Sounds like you might want to explore some tax planning to understand this better and get more insights specific to your situation.
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*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.