Investor · Tracy, CA · Member since 2014 · 49 posts · 11 votes
Hello,
Can I use bonus depreciation losses from apartment syndication (form K1) to offset income from income-producing single-family rentals? I own 4 SFRs and have an opportunity to invest in a syndication deal with 60% bonus depreciation this year.
Other details: Both I and my wife have W2 jobs and can not take real estate professional deduction.
Yes you can. Keep in mind that in the final year of the syndication it will throw your way a large capital gain, including the reversal of all their depreciation from cost segregation.
Yes you can. Keep in mind that in the final year of the syndication it will throw your way a large capital gain, including the reversal of all their depreciation from cost segregation.
I am not a tax advisor, but I believe you should get 80% on your bonus depreciation this year. Also, mt CPA calls the strategy you are talking about the "Lazy 1031".
Yes. Since you have stated that you do not qualify as a real estate professional and your SFRs are passive, you will be able to utilize losses generated from the apartment syndication to offset income from your SFRs.
@Asim G. Sounds like you've got a handle on one of real estate's sweet spots! Back in 2017, I sold off my turnkey rentals and was looking at capital gains and depreciation recapture.
I had some losses carried over from my previous years in syndications (majority of which was from the bonus portion). So, I used those losses from the past and the ones from that year to balance out my gains. I ended up paying zero in taxes, which was a massive win compared to the headache of a 1031 exchange. Seriously, once you've seen the light of syndications, 1031s seem like a puzzle with too many pieces.
If you're ever stuck or just want to swap stories, give me a shout. Always happy to help a fellow investor out!