All Forum Posts by: Mark Jensen

If a primary residence is converted to a long-term rental property, can bonus depreciation still be claimed in the first year? Our CPA says yes but the cost segregation specialist says bonus depreciation does not apply to primary converted to rental.

Yes, you can apply bonus depreciation to a converted property, with some caveats:
- it will be based on your original purchase price, not today's value
- bonus depreciation for 2024 is 60%, not 100%
- most importantly, you may or may not benefit from cost segregation/bonus depreciation

Read this: https://www.biggerpockets.com/forums/51/topics/1075919-five-...

I talked w/ my CPA about this exact thing becuase I have a similiar situation with my property.

From my understanding, properties purchased before 9/27/2017, and placed in service after 2020, are not eligible for bonus depreciation.

This is stated in the tax code under Section 168(k)(8) which outlines the bonus depreciation phase-down rules for property acquired before 9/27/17. Since the primary was purchased before 9/27/2017 and was placed in service after 2020, it is not eligible for bonus depreciation.

(8)Phase Down

In the case of qualifed property acquired by the taxpayer before September 28, 2017, and placed in service by the taxpayer after September 27, 2017, paragraph (6) shall be applied by substituting for each percentage therein—

(A)“50 percent” in the case of—

(i)property placed in service before January 1, 2018, and

(ii)property described in subparagraph (B) or (C) of paragraph (2) which is placed in service in 2018,

(B)“40 percent” in the case of—

(i)property placed in service in 2018 (other than property described in subparagraph (B) or (C) of paragraph (2)), and

(ii)property described in subparagraph (B) or (C) of paragraph (2) which is placed in service in 2019,

(C)“30 percent” in the case of—

(i)property placed in service in 2019 (other than property described in subparagraph (B) or (C) of paragraph (2)), and

(ii)property described in subparagraph (B) or (C) of paragraph (2) which is placed in service in 2020, and

(D)“0 percent” in the case of—

(i)property placed in service after 2019 (other than property described in subparagraph (B) or (C) of paragraph (2)), and

(ii)property described in subparagraph (B) or (C) of paragraph (2) which is placed in service after 2020.

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I purchased a Multi-Family property in February 2022 in Columbus, OH. Recently I got notified that the county reassessed the property value for 2021/2022 and now I owe a large tax bill for 2021 which is a year that I never even owned the property. After discussing with an attorney, there is a law (recently got changed) that allows them to do this based on a recent sale price of a property and the new owner owes the backdated tax amount.

Does anyone have any suggestions on how to fight this in general?

This just does not seem fair/right simply because they are asking me to pay taxes on a property that I didn’t own at that time/collect any income during that period. But on top of that, I feel that there is an argument that the property was not worth the sale price I paid on February 2022 for the year 2021. Only in QTR4 of 2021 did the previous owners get rents up to market. For the previous 3 QTRs, the property was receiving 25% less income than what it was getting upon the closing date. Isn’t there a solid argument that the rental income being 25% lower for the majority of the 2021 would directly effect the value of the property? My attorney and the people they tried to negotiate this with at the county don’t seem to think so….

Looking for some opinions / strategy here! Thanks so much!!!

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All Forum Posts by: Mark Jensen

Mark Jensen has started 1 posts and replied 2 times.

Post: Bonus depreciation on primary converted to rental

Post: Columbus, OH Multifamily - Tax Due for Year Prior to Ownership