Cost Segregation - LTR to STR Property

[Nickolas Wolfe]

Good day,

Property background - home was a LTR for 2021 and 2022. In December of 2022, we started to convert it to a STR. In January of 2023, it became an STR.

Big question - in my case, is a cost segregation study worth it if I am not a real estate professional? If a cost segregation study was performed, would we need to start taking bonus in 2021 when the property was a LTR, making the loss passive? 

I would like to offset other Schedule C income for 2023 with the STR bonus depreciation from the cost seg., but it is not looking too promising.

[Michael Plaks]

@Nickolas Wolfe

Cost segregation applies to when the property was first placed in service which is 2021. However, since you already filed 2021 and 2022, the adjustment will be happening on your 2023 taxes. It may play out well for you, but the details are tricky, and the adjustment procedure is complicated. Not recommended for DIY.