Cost Segregation on my House Hack to reduce W2 income

[Ryan Newport]

Hi, I am currently house hacking a triplex. It's my understanding that an individual is allowed to deduct up to $25,000 in PASSIVE losses against ACTIVE income if and only if that individual earns less than 100k MAGI (modified adjusted gross income). I am making less than 100k MAGI in this current tax year. I am NOT referring to a real estate professional status, but rather referring to Passive Activity Limits. Here's a link to what I am referring to: https://www.stessa.com/blog/pa...

My question then is, if I did a cost segregation study on my triplex using verified/trusted software such as KBKG (which only costs $400 to do), could I use all that accelerated depreciation to take an additional $25,000 reduction against my W2 income, and carry over any remaining accelerated depreciation into future years?

The follow up to this question being, since I only rent out 2/3rds of the property, would I only be allowed to claim 2/3rds of the accelerated bonus depreciation? And the final follow up to that is: If I am only allowed to take 2/3rds of the depreciation because I live in one of the units, am I missing out on carrying forward any losses I would be able to gain from depreciation once I am not occupying the property in another year and it is fully rented/investment. 

-- I understand this is tricky/intricate and extremely specific. I appreciate insight! 

[Natalie Kolodij]

You can definitely utilize a cost seg on the 100% business units. 

As long as your AGI is under $100k you'll be able to utilize up to $25k in passive losses against other income sources.

Another thing to be mindful of is that if you expect to move out and rent all 3 units you may want to wait and utilize a cost seg at that time. 

If it isn't the original year of purchase a form 3115 needs to be filed to account for the depreciation changes brought forth by the cost seg- and this form is a little complicated and your CPA will likely charge for it so you won't want to do it twice.