Cost segregation for W2 non-Real Estate Professional? I think it does, am I wrong?

[Bob Dole]

Non-REP
Interests, dividends, capital gains, and rental income (W2 is TBD.  "Semi-retired" and may or may not rejoin the workforce.)

Just had a cost-segregation study completed.  Because we are non-REP, we can't leverage the bonus deprecation against our active income streams.  

Correct me if I'm wrong, but with the cost-segregation, I could essentially pay no taxes for our rental income for quite a few years.

Example numbers:
$2m property purchase
$800k bonus depreciation
$125k rental income annually
No taxes paid on rental income for the next 6.4 years or so.  Is that correct?  Will this lower my AGI as well?  If so, my only taxable income would be interests, dividends, and capital gains.

If so, a cost segregation study makes complete sense in the medium term.  I can't utilize all the depreciation right away, but I can within 10-years.

It seems to me that once I exhaust my bonus depreciation, I may need to "rinse and repeat" the process of acquiring another property and running a cost segregation study again, etc.

[Michael Plaks]

Quote from @Bob Dole:

Non-REP
Interests, dividends, capital gains, and rental income (W2 is TBD.  "Semi-retired" and may or may not rejoin the workforce.)

Just had a cost-segregation study completed.  Because we are non-REP, we can't leverage the bonus deprecation against our active income streams.  

Correct me if I'm wrong, but with the cost-segregation, I could essentially pay no taxes for our rental income for quite a few years.

Example numbers:
$2m property purchase
$800k bonus depreciation
$125k rental income annually
No taxes paid on rental income for the next 6.4 years or so.  Is that correct?  Will this lower my AGI as well?  If so, my only taxable income would be interests, dividends, and capital gains.

If so, a cost segregation study makes complete sense in the medium term.  I can't utilize all the depreciation right away, but I can within 10-years.

It seems to me that once I exhaust my bonus depreciation, I may need to "rinse and repeat" the process of acquiring another property and running a cost segregation study again, etc.

Some major misunderstandings here, despite lavish praise from my colleagues.

1. The starting point is the deductions you already have: mortgage interest, property taxes, insurance, management fees, maintenance, HOA and so on. And also regular depreciation. All of this is deducted from your $125k rental income. And it is quite possible that you already wipe out the entire $125k. If you offset the entire rental income, you should probably stop here.  No need for cost segregation. (With some exceptions.)

2. If you still have $25k left as a positive number, and you will continue having a positive $25k net income, then your $800k bonus depreciation would be erasing this $25k year after year until depleted - or until you sell the property.

3. $800k bonus on a $2MM property is a stretch, I'm afraid.

4. You will not lower your AGI below what you already have from your W2. You prevent your AGI from going up but you cannot push it down, unless it's under $150k. Then you have a limited window to push it down somewhat.

5. You need to plan for your exit from this property, for example a 1031 exchange.

More on depreciation: https://www.biggerpockets.com/forums/51/topics/1121063-expla...