All Forum Posts by: Yonah Weiss

Thanks for the mention @Michael Plaks!

@Mike Zamolo, as Michael mentioned, make sure it is going to be good for your specific scenario. Most cost seg firms work nationwide, and fees vary based on the size and type of property.

 DMs are open. Happy to help.

Quote from @Michael Dallas:

Quote from @Ryan Thomson:

@Michael Dallas really smart idea to house hack! I wish I was thinking like you when I was your age living in Colorado Springs. 

As far as cost segregation goes:

1. I don't believe you can do that when its your primary home. When you are house hacking you could cost seg but only the percentage of the property that is a rental. I don't think it'd be worth it until you move out AND if you are considered a "real estate professional" by the IRS. 

2. If your Dad doesn't meet the "real estate profession" status criteria,  I don't think he will be able to use the cost seg study to reduce his w2 taxes. It only reduces the property income or other real estate-related income. 

 @Ryan Thomson thank you so much for the help!

 Agree to both of Ryan's points here.

Quote from @Daniel Dietz:

Some good info being shared here!

I have a similar but slightly different question. I DO qualify as a REP (contractor doing my own maintenance and PM on my own properties. But my income is not that high to really worry about offsetting.

BUT, what I would like to do it 'convert' some properties that I own in my SOLO401K from 'Traditional' to 'ROTH'. Just like a regular IRA or SOLO, that would be a 'taxable event'.

If I did a SOLO401K Roll-over of say 100K that would normally be counted as Ordinary Income Tax (I think). Would the Cost Segregation Study, IF it produced 100K of "Accelerated Depreciation", 'offset' that 'extraordinary income' from the SOLO401K roll-over?

I hope that makes sense :-)

Thanks, Dan Dietz

 The answer for you, because you have REPS is YES.

I'll let one of our resident tax experts like @Natalie Kolodij correct me if I'm wrong.

Quote from @Liz Caskey:

@Yonah Weiss Thank you for taking the time to reply, I was just listening to a very informative podcast with you, funny coincidence! Does ADS require a similar set up like doing a cost seg (i.e. having an engineer visit)? I am trying to understand all the pieces right now to prepare for our next visit and have a clear strategy with taxes since we will be receiving income from this property and have invested to get it into service.

The cost seg would have the same requirements, just the ADS accounting method is different, and significantly less advantageous when combined with cost seg.
As far as the engineer visit, many firms use remote video walkthroughs in place of having an engineer physically visit the property.

@Liz Caskey as @Greg O'Brien said Bonus depreciation is not allowed on a foreign asset. You also have to depreciate the property with a different method called ADS (Alternate Depreciation System). You can potentially do a cost seg, but it is not as beneficial especially with smaller properties, since with ADS the 'personal property' is on a 9 years schedule instead of the regular 5 year schedule.

@Keetaek Hong I agree with @James Parrish about finding a company that will provide an engineer based "quality" cost segregation study that will hold up in an audit. If your CPA gave you guidance on the STR 'loophole' did you ask them for recommendations for a good cost seg company?

Like many things in life and business, cheapest is not always the best. I would ask:

How long have you been in business, how many cost segs have you done?

Which method of cost seg do you follow?

What kind of experience with STRs do you have? (since that's the type of property you have)

How long does the process take?

Will you stand behind the work in the event of an audit?

There are many companies out there, and several of us represented here on BP. Most companies will provide an upfront feasibility analysis, or estimate, so you can see what the potential savings are, and can report back to your CPA to see if they think it's worthwhile.

@Tony Sorensen BP has a new CPA and tax advisor directory. https://www.biggerpockets.com/...

Quote from @Jon Fletcher:

Now that 100% bonus depreciation is over and tax returns have been filed, the next question on a lot of people's minds is: Can I switch my STR property to a long-term rental? The tax benefits are gone, but the management of an AirBnB is still there. Is there a minimum amount of time that the property should remain a STR before switching to a long-term rental?

 Bonus depreciation was reduced to 80% this year instead of 100% which means it's still pretty good. It will continue to go down by 20% each year until totally phased out.  So the tax benefits are not gone yet.

The cash-flow from STRs is usually much greater than LTRs, albeit if you're self managing it can be more intensive.

Quote from @Anthony Battaglia:

Quote from @Yonah Weiss:

Quote from @Anthony Battaglia:

Hey All,

I live in San Diego and I'm thinking about house hacking a duplex. I will be living in one and doing a STR in the other. Most likely the bigger and nicer unit.

My question is, if the home is bought on a conventional loan for personal use can I still Cost Seg a portion of the house and take the tax advantage against my W2 since the other side will be a STR.

I make around 250k single with no kids and looking into a million dollar plus units so I believe that the tax advantage would be great even if able to split 50/50 with personal and STR side.

Thanks for the help

The type of loan you get does not effect your ability to claim depreciation/cost segregation. Important to note, that when doing a cost seg on a house hack, you can only depreciate the portion of the property that is a rental unit. So let's say you bought the duplex for $500k ($250k for each unit) and land value is $100k, $200k would be your depreciable tax basis.

You mentioned the ability to offset your W2 with the losses because this is an STR, (and even though we've discussed this, for the sake of the forum) make sure you meet the material participation requirements and your CPA understands this as well.

Thank you @Yonah! This is why I always go to Madison Specs for my Cost Segs! Another question for you.
Let’s say I depreciated the one half I am eligible to in first year.
After me moving out of the house after staying for a year, I am able to depreciate the other half of the house if turned into a STR?

Yes, you are eligible to claim depreciation in the first year of the rental unit. Once you move out and turn the second unit into a rental, there will either be a step up in basis to claim the full purchase price on your depreciation schedule, or you will list it as a separate rental unit and depreciate it separately. I've seen this done both ways.

Quote from @Linda Weygant:

BiggerPockets has a CPA referral page:

https://www.biggerpockets.com/...

 That's really cool feature BP has, I didn't even know that existed! Thanks for sharing