All Forum Posts by: Trent Chance

Has anyone done a cost segregation on a rental property since the 100% bonus depreciation became allowable in 2018? If so, what percentage of the purchase price were you able to depreciate in year 1? How much did the cost segregation study cost?

You can also look for Mark Kohlers you tube video on cost segregation.  The ins & outs of cost segregation was eye opening.  Then confirm with your own qualified real estate CPA. 

Hope that helps, 

Roberta 

@Trent Chance also be aware you are accelerating something you would get in the future. In other words, you are decreasing tax liability today and increasing it in the future. You are also subject to recapture if you sell. To avoid this you can exchange the property, but you are then transferring your "used depreciation". That means there is also less available depreciation in the new property. Just be aware the taxes pile up over time. Your passive loss could quickly turn into a profit and even require you to make quarterly tax payments to the IRS. I am not saying you shouldn't do it, just plan out into the future and understand the long term strategy. There is no free ride, even in real estate.

@Trent Chance

If you are involved in real estate and trying to claim real estate professional status - you likely want to work with a professional who can guide you.

There is extensive record keeping requirements when claiming real estate professional status.
People would be surprised what hours count and what hours don't count.

Regarding your tax situation - you may be able to decrease your taxable income by 100% of whatever the real estate losses are(would be helped through a cost seg).
The tax savings depend on what federal and state tax rates you are in now.

@Trent Chance

You need to speak with your CPA, I don’t know how it will affect YOUR tax situation. If I bought a 450k triplex in KC I would assume ~90k in losses. I don’t know the land value where your investment is and I can’t give tax or legal advice. You’ll be well-served to work with a professional to get that!

@Mark Fletcher

My rule of thumb is that 20% is on the 5 year amortization schedule and can be taken as bonus deprecation. For small props there are algorithm based studies that are less expensive that engineered studies. Depends on how large the prop is. But 20% is a decent rule of thumb, great to get more.

@Diane Savoian

I look for a score of at least 600. It's more important to understand what makes up the score. Late payments, why they are late and mostly historical. People are renting for a reason, no down payment, poor credit score, etc. You want a long term tenant anyway. I look at past evictions, job history, income, debt, and DTI as well (45%).