All Forum Posts by: James Parrish

@Wendy Stclair

The threshold for RE professional status is typically more than 50% of your work hours have to be dedicated to real estate, those hours must also add up to 750 or more. There's a lot of nuance that goes into determining if a cost segregation makes sense for your situation, so utilizing a real estate specific CPA is crucial. A quality cost segregation company, with the correct information, will also tell you if this strategy makes sense or not.

Best of luck! 

@Frank Rubino

Generally, structural elements of a building cannot be accelerated. Also, systems that serve the general maintenance and operations of a building or home are excluded as well. There's a lot of nuance that goes into determining what can and can't be accelerated, I'd suggest consulting one of the many professionals in this forum.

When deciding which "type" of property to buy I'd focus on which property makes more sense from a financial perspective rather than a tax perspective. Assuming both are home runs though, I'd say both types can get you similar deductions from a percentage perspective. While the number of units can increase your deductions, what really matters is what systems and materials are used inside the house.

Again a lot of factors come into play here. Feel free to DM me if you have any questions.  

@Michael Evans A cost segregation study can be done for both residential and non-residential real estate.

@Allen M Miller

If you're currently renting out this property it can be cost-segregated. This is because now you have to depreciate this property over 27.5 half years, assuming that it's a residential rental. What a cost seg does is it reclassifies the assets of your property into shorter recovery periods (5 & 15 year), creating larger deductions in the short term. So long as you're renting out this property or your property was "ready" to be rented in 2022 you're good to go, whether or not you've set up an LLC will not affect your ability to use cost segregation. Feel free to DM me if you have any other questions

@Kelby Gowin

Hi Kelby,

Understanding if a cost segregation study makes sense for your situation can be tricky. Luckily, most cost segregation professionals provide a free analysis that shows whether or not it's worth pursuing. In this analysis, we typically outline your potential tax benefit, project cost, and any limitations particular to your situation. Also, most cost segregation firms service clients all over the country, there are a few in this forum that would be happy to help.

@Berry Starnes Yes correct, pardon me. If the property was purchased, rehabbed, and placed into service in 2022 you will still be able to get that 100%. 

Losses from cost segregation can be carried forward and used against future rental income, but if you do cost segregation this year and create passive losses those losses become suspended and cannot be used against W2 income in the future. If you wait until 2023 and your wife qualifies as REP, which is a different discussion in it of itself, you'll be able to use losses created from cost segregation against your W2 income. As far as timing goes, you can always file for an extension on your taxes and do a cost segregation study later in the year. 

If you're confident that your wife will quailfy as a REP in 2023, I'd look into doing a cost seg for TY 2023. While you won't get 100% bonus, you'll still get 80% plus you'll be able to use real estate losses against W2 income. It can get quite complicated; I suggest talking to your CPA or direct messaging a professional on this forum. 

Cheers 

@Berry Starnes

I agree with @Michael Plaks if you have no rental income and do not qualify as a REP cost segregation does not make sense for 2022. If you start renting your units and your wife meets the REP requirements in 2023 this strategy will be much more beneficial. Contact a cost segregation professional, most will provide you with a free quote showing your potential return on investment

@Alan Fong Often cost segregation studies do make sense even if the property was purchased years ago. What you should be thinking about however is if you can use losses created from a cost seg study to offset W2 or other income, referred to as non-passive income. These losses can be locked up if you're not a real estate professional (REPs). If you plan on adding more properties to your portfolio, or plan on spending more time on your real estate in the future it may make more sense to do a cost seg study down the line, so your losses aren't suspended. Remember, bonus depreciation is still 80% next year, which is still significant.

Nevertheless, most cost segregation professionals will provide you with a free analysis that shows you whether or not it's worth it. Hope this helps!

If you hired someone to drain the water and fix the damage that part could be expensed. The installation of the pump, french drain, and plumbing however would be an improvement and therefore charged to the capital account.