Bonus Depreciation. Which items qualify?

Question

I recently reviewed my taxes prepared by my CPA. I discussed with him the option of bonus depreciation.  He asked for specific cost items.  These included HVAC, roof, fire alarm and security system, cost of beds, furniture and appliances.  Are these the only items that qualify for 100% bonus depreciation?

Tzvi Nussbaum · Answer

Thank you Yonah.  My CPA said that since I am 50% owner of the LLC’s, that only half would go against the W2 and the rest as suspended losses.

Yonah Weiss · Answer

Tzvi the point he was alluding to, was that according to the IRS, if you are filing jointly, then only you OR your spouse needs to reach the real estate professional status, which allows you to use the passive deductions to offset your JOINT income. Both passive and active.

Please see this IRS publication with the clear definition. https://www.irs.gov/publications/p925#en_US_2018_publink1000104586

This is the exact wording in RE Professional status:

If you file a joint return, don’t count your spouse's personal services to determine whether you met the preceding requirements. However, you can count your spouse's participation in an activity in determining if you materially participated.

Tzvi Nussbaum · Answer

I was informed that since I am a physician, it would be difficult to prove, in the event of an audit, that I do more hours of work as a real estate professional than I do as a physician.

Lance Lvovsky · Answer

@Tzvi Nussbaum

What’s the reasoning to flush the income as passive? If you have net income, better to utilize the real estate professional status to make it nonpassive. Also no need to worry about 199A safe harbors as now you are a trade or business for 199A purposes.

Tzvi Nussbaum · Answer

That’s is I file passive and my wife as active.  We file jointly.

Tzvi Nussbaum · Answer

My wife qualifies as real estate professional.  I work a full time job and therefore even though I work over 1300 hours a year doing real estate, my CPA suggested filing as passive.  I own 6 single residential properties and 3 small commercial multifamily Properties.

Yonah Weiss · Answer

Tzvi,

There at least a dozen other items that can potentially qualify for bonus depreciation. What type of properties do you own? To maximize your deductions with bonus depreciation, it might be worthwhile to do a full cost segregation study, which will properly identify all of the assets in the property that can have a faster depreciation life. This is especially advantageous if either you or your wife are 'real estate professionals'

Lance Lvovsky · Answer

@Tzvi Nussbaum

Hvac and security systems for nonresidential can use section 179. Do you own nonresidential?