Cost segregation for single family rentals?

Question

Hi there! We have a couple rentals which are newly constructed single family homes. The purchase amount was $300,000 each and the land cost was about $47,000 each.

I'd love to take advantage of bonus depreciation, however, we would need to do a cost seg study in order to do that.

Does anyone know a way to get an affordable study done on SFR? I'm interested in maximizing our deductions because my wife does have the real estate professional designation. She has a high income and so do I, so we pay a lot in taxes...

Kevin Grove · Answer

There is a company called KBKG that Tom Wheelwright recommends. They have software called "Residential Cost Segregator". The cost segregation reports cost about $400 per property. They are for up to 6 units and $500,000 properties. You can have your CPA do the report, or I think you can even do it yourself. Audit support is included.

Costin I. · Answer

@Stephen Gregory @Jaron Walling - What @Kevin Grove said. I used KBKG to run cost seg reports in three instances for my SFR rentals. Once you learn how to use the calculator (and assuming you have all the required characteristics of the property) it takes 20min to generate one. Then you give it to your CPA to put it in your tax return. The depreciation acceleration (keep in mind, it's not a save, it's an acceleration) can be substantial.

Brian Boyd · Answer

My accountant at BDO has performed these for our properties and they run about $500 apiece. It was completely worth it to accelerate the bonus depreciation. Consult your accountant to get a study done. It is worth the cost or just find software online to do it yourself. Good luck!

Stephen Gregory · Answer

Awesome guys! Thank you

Jaron Walling · Answer

I've read into this topic a few times and it usually comes back to money. Performing a cost segregation COST money so it's primarily used on multi family property. Think big economy of scale, 100+ units, 1-2 buildings in the same study. If you have a few rentals it's probably not worth the time to save a couple hundred dollars.

I'm not an expert on the topic. Hopefully others join the conversation. I'd like to learn more as well. Good luck.

Cost segregation for single family rentals?

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