bonus depreciation tax write off

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Sean O'KeefePro Member
CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votes
2y

@Lotta Rozenson For real estate investors, bonus depreciation is available on assets with a useful life (e.g. period asset takes to wear out) of 20 years or less. 

The amount of bonus depreciation you can take may change each year - 2023 the amount is 80% (but there is legislation that may change this to 100%).

Actively managing the property doesn't change the IRS rules on whether or not an asset is eligible for bonus depreciation. Participation in actively managing the property, in addition to other factors, changes whether or not losses from a rental (losses that may include bonus depreciation) can be used to offset non-passive income (W-2, 1099, etc). 

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*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

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  • Sean O'KeefePro Member
    CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votes
    2y

    @Lotta Rozenson For real estate investors, bonus depreciation is available on assets with a useful life (e.g. period asset takes to wear out) of 20 years or less. 

    The amount of bonus depreciation you can take may change each year - 2023 the amount is 80% (but there is legislation that may change this to 100%).

    Actively managing the property doesn't change the IRS rules on whether or not an asset is eligible for bonus depreciation. Participation in actively managing the property, in addition to other factors, changes whether or not losses from a rental (losses that may include bonus depreciation) can be used to offset non-passive income (W-2, 1099, etc). 

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    *This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

    [email protected]628-241-0888
    2Reply
  • Lotta Rozenson
    OP
    Member since 2021 · 4 posts · 3 votes
    2y

    thank you for your reply, Sean O’Keefe! 

    So, if i have a full time w-2 job (unrelated to real estate) and a out of state rental that is managed by a rental property manager, i can not use bonus depreciation to write off my w-2 income?

    1Reply
  • Sean O'KeefePro Member
    CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votes
    2y
    Quote from @Lotta Rozenson:

    thank you for your reply, Sean O’Keefe! 

    So, if i have a full time w-2 job (unrelated to real estate) and a out of state rental that is managed by a rental property manager, i can not use bonus depreciation to write off my w-2 income?

    @Lotta Rozenson since you have a property manager and are out of state it is unlikely that you qualify for material or active participation in this rental property. I say "unlikely" because, without all of the detail, it is difficult to be 100% certain)
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    *This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice

    [email protected]628-241-0888
    1Reply
  • Lotta Rozenson
    OP
    Member since 2021 · 4 posts · 3 votes
    2y

    Thank you, Sean! 

    0Reply
  • Account Closed
    Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes
    2y

    @Sean O'Keefe did an awesome response here. I just wanted to add that if your spouse qualified as a real estate professional, then you potentially could take the write off :) Its worth something exploring! 

    0Reply
  • Bill HamptonBusiness Member
    Accredited Investment Fiduciary, AIF®, Financial Planner, Tax Strategist, Real Estate Investor · Atlanta, GA · Member since 2012 · 2k+ posts · 977 votes
    2y

    @Lotta Rozenson,


    I recommend finding an accountant that specializes in real estate taxation. You may want to consider working with your accountant remotely to expand your options.

    I would also recommend looking for a tax strategist who is willing to work with you throughout the year, not just when preparing your tax return. You want an accountant that can help you strategize and who is responsive when you want to know the tax consequences of the decisions you are making throughout the year.

    Good luck in your search.

    404-482-3170
    Hampton Tax and Financial Services LLC4.7106 Reviews
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    0Reply
  • Joshua Davidson
    Rental Property Investor · Morgantown, WV · Member since 2018 · 57 posts · 24 votes
    2y

    Hi @Lotta Rozenson,

    In some cases, taking a Section 179 deduction can end up giving you a bigger deduction than bonus depreciation, especially with bonus depreciation being reduced to 80% for 2023, as @Sean O'Keefe mentioned previously. Just wanted to throw that out there as I noticed it hadn’t been mentioned.

    To answer your question directly, no you do not have to actively manage a property to use bonus depreciation (or Section 179 depreciation), but you may be subjected to Passive Activity Loss Limitations if you generate a net loss. It’s best to speak directly to a CPA that you have engaged to do work to get a more detailed response and analysis.

    Best of luck!

    0Reply
  • Lotta Rozenson
    OP
    Member since 2021 · 4 posts · 3 votes
    2y

    thank you! 

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    2y

    Nope, can be a LP in syndication. Also syndication using 179 losses too can be takes as LP.

    0Reply
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