Cost Segregation Study for Airbnb

[Victor Lavigne]

Good morning everyone,

Curious to see if someone could help with the following question:

If I perform a cost segregation study for a short-term rental property purchased the previous year, would I amend the return for the previous year or adjust in the year of the cost segregation study?

Also, do the aggregate losses above any W2 income get carried over to the following year?

[Sean O'Keefe]

@Victor Lavigne

To answer your question: If I perform a cost segregation study for a short-term rental property purchased the previous year, would I amend the return for the previous year or adjust in the year of the cost segregation study?

1. You don't need to amend the return. You can just file Form 3115 as @Malik Javed mentioned. This form is 10 pages long and isn't simple to complete.
2. If rental losses generated by cost seg exceed income in tax year this is referred to as a Net Operating Loss and gets carried forward into future tax year.

Finally, make sure that your short-term rental (STR) meets IRS requirements and doesn't get classified as long-term or this could prevent you from leveraging this tax strategy event though you are materially participating in property and it was placed in service.