Depreciation with Turnkey Properties

[Ken T.]

I was looking for a post on this topic but couldn't find one. I was informed recently by a real estate CPA that in order to depreciate (as a tax write-off) with turnkey properties that you need to demonstrate material participation or be involved with making a major decision with the property. Purchasing the properties would count for the first year so that's taken care of but later years would require something along the lines of approving a large expenditure or having a say in choosing the tenants for the property. I am wondering how most people with turnkey properties usually go about doing this? Thanks in advance

[Christopher Smith]

I think what he was referring to were passive activity loss limitations rules, not rules specifically limiting depreciation. You should not be restricted in your ability to depreciate, but you may be restricted in your ability to ultimately utilize any passive loss attributable to the depreciation unless you have some active participation with respect to the property.