Bonus depreciation without being a real estate professional

[Brett Trammell]

My wife and I bought our second rental property last fall - a 4-plex. I’ve been hearing about taking the bonus  depreciation and while it sounds like it would be a great strategy if we were full-time real estate professionals the IRS considers our rental business passive. To make it worse, we’re outside of the earning threshold to claim passive losses against our active earnings. Is there still a benefit?  Maybe for doing a 1031 in a few years into a larger property?  Anybody else in our position looking at this?

Thanks,

Brett

Keizer, Oregon

[Michael Plaks]

Originally posted by @Brett Trammell:

Thank you Lance. Wasn’t there a change in the tax law though that allowed for depreciating a rental property in its first year instead of over 27 years?

No, there was not.

However, you're right bringing up the 1031 concept. Whatever methods you can use to accelerate depreciation, even if they cannot help you this year, might help you eventually if you end up doing a 1031 exchange. You need professional guidance for such planning, however, particularly because the rules for 1031 did change, and some old planning ideas need to be revised.