Cost Segregation on Primary Residence if renting out the basement

[Ryan Judkins]

I live upstairs in a primary residence and have just started renting out the basement.  Can I get cost segregation depreciation on the % of the house that is rented out?

[Ashish Acharya]

Yes, if you meet all the rules that can get complicated especially for a house hack.

[Julio Gonzalez]

@Ryan Judkins Yes, it's absolutely possible. There's a bit more that goes into it than a cost segregation on an entire home, but it could still be beneficial. I'd recommend getting a free cost/benefit analysis quote from a cost seg company to determine if the tax benefits would outweigh the costs. Do you have real estate professional status?

[Ryan Judkins]

My wife is a real estate agent

[Ryan Judkins]

@Julio Gonzalez - my wife is a real estate agent

[Scott Mac]

Basement Dwellers will be your renters.

[Julio Gonzalez]

Quote from @Ryan Judkins:

@Julio Gonzalez - my wife is a real estate agent

 Real estate professional status is for tax purposes and has multiple qualifications. I'd speak with your CPA to confirm whether or not your wife can qualify as a real estate professional because that makes a difference in being able to use your losses from the cost seg study now versus rolling them forward.

https://www.aicpa.org/resource...

[Basit Siddiqi]

I would speak with a CPA before going with your stategy.

Rental losses on a owner-occupied SFH rental may be limited(even if you qualify for real estate professional status).

But if your question if can I do a cost segregation...the answer to that is yes...

[Catherine Javier]

Quote from @Julio Gonzalez:

@Ryan Judkins Yes, it's absolutely possible. There's a bit more that goes into it than a cost segregation on an entire home, but it could still be beneficial. I'd recommend getting a free cost/benefit analysis quote from a cost seg company to determine if the tax benefits would outweigh the costs. Do you have real estate professional status?

 I have the sam situation. Just wondering if this is allowable especially if I meet the requirements for short term rental requirement for tax purposes like 100 hours?

any thoughts? Thanks!

[Julio Gonzalez]

@Catherine Javier It's hard to say without more information, but your CPA should be able to tell you. Are you working with a CPA that specializes in real estate taxation?

[Catherine Javier]

We were, but he missed 2 things, my wife’s income and the taxes I paid. He was able to correct them bit we are a bit hesitant and we’re trying to find a better CPA that can be our tax planner/strategist.

[Julio Gonzalez]

@Catherine Javier 

I have worked with a number of great CPAs that specialize in real estate taxation over the years and would be more than happy to provide you with recommendations if you'd like? Also @Ashish Acharya and @Michael Plaks are very active in the forums and highly recommended.

[Nate Meeker]

@Catherine Javier 

IRS Pub 527 states "Example. You rent a room in your home
that is always available for short-term occupancy by paying customers. You don’t use the
room yourself and you allow only paying customers to use the room. This room is used
solely as a hotel, motel, inn, or similar establishment and isn’t a dwelling unit."

Common areas don't apply. Only if you have a portion not used for anything else and you meet all other rules. You would want to allocate expenses on a sqft. basis.

[Catherine Javier]

Quote from @Nate Meeker:

@Catherine Javier 

IRS Pub 527 states "Example. You rent a room in your home
that is always available for short-term occupancy by paying customers. You don’t use the
room yourself and you allow only paying customers to use the room. This room is used
solely as a hotel, motel, inn, or similar establishment and isn’t a dwelling unit."

Common areas don't apply. Only if you have a portion not used for anything else and you meet all other rules. You would want to allocate expenses on a sqft. basis.

 Thanks! 
by the way to qualify for the STR, of I am not mistaken it should be 7 days or less right


so 7.2 days immediately disqualifies me immediately? 
or 8 days and above 

I just averaged the length of stay…