Real Estate Depreciation Offset Stock Capital Gains?

[Jung Won Kim]

Hi,

I had a quick question - hypothetically, if I had capital gains on stocks, could I theoretically purchase a property that same year and do bonus depreciation from the property to offset my stock capital gains taxes?

For instance, let's say I have $50K capital gains tax. If i purchase a property worth around $250,000, and recognize 20% depreciation ($250K X 20% = $50K) through cost segregation, bonus dep, etc, would I effectively pay zero capital gains on my stocks? Or are real estate depreciation only used to offset real estate income?

[Yonah Weiss]

@Jung Won Kim The short answer is no...but it depends.

For someone who is not a 'real estate professional' deprecation can only be used to offset income from real estate (the exception is if one's Adjusted Gross Income AGI, is less than $150,000 there is a certain amount that can be used to offset other income).

If one is a 'real estate professional' they can use the bonus depreciation created through cost segregation to offset all of their income, and if there is any depreciation left over after that, it can be used to offset capital gains.

Capital gains tax from stocks can now be deferred by investing in an opportunity fund that investing in properties in designated locations called opportunity zones.