CPA says no to Depreciation

[Pavan K.]

Hey Experts! Would love your inputs on this one.

Every blog/article I read regarding rental property advices to use depreciation for the rental property. Last year I bought a single family home as an investment  property ($600k ~) . I hired a CPA suggested by my advisor and asked about depreciation during my tax filing session and to my surprise CPA advised against depreciation and doesn't recommend it. I wasn't expecting this and didn't have any questions to ask as to why not. 

Now that the tax season is over and have all the time in the world to explore on the depreciation , what questions should I ask my CPA . Im fluctuating  between 32-35% tax bracket if that helps .

[Allan C.]

Assuming you're taking about normal depreciation, you'd be absolutely crazy for not taking it. One of the biggest benefits of REI is using depreciation to defer/eliminate taxes. You're basically paying $3k more taxes a year by not using $10k+/yr depreciation to offset rental income. Over a 10 year span that's $30k minimum you're losing, and likely $60k+ due to opportunity cost.

And guess what, if you don't take depreciation, you may be on the hook for depreciation recapture anyway since it's expected that you take depreciation. 

lastly, if your CPA says that depreciation only defers your taxes and you'll eventually have to pay it, then ask him/her how they account for Net Present Value and compounding interest. There's also 1031x and step up basis that can further defer/eliminate depreciation recapture. 

same principles apply for bonus depreciation considerations. 

as you progress your REI journey you'll understand how powerful expense offsets are, even if some get suspended for a period of time. Safe Harbors are also your friend to expense items you'll normally capitalize.