All Forum Posts by: Bonnie Griffin Kaake

Another point that was not mentioned above and that many tax professionals still get incorrect is that a STR of less than 30 days is depreciated over 39 years. Whereas, rentals of 30 days or more are depreciated over 27.5 years. Check your depreciation schedule to be sure it is depreciated over the correct number of years or put up a red flag for the IRS. What people are calling Mid-term rentals are actually long-term rentals that are depreciated over 27.5 years.

Bonus Depreciation can apply to either in most cases depending on the year of purchase.

RV parks are treated much like Short-Term Rentals and commercial properties. They are depreciated over 39 years. MHP are depreciated over 27.5 years like residental rentals. 

When a cost segregation study is done on an RV park or MHP, depending on the year of purchase, the owner may be able to depreciate anything that is identified as 5-year and 15-year assests the first year of ownership with 100% Bonus Depreciation. The extra cash flow that results when you don't have to pay taxes can be used to upgrade the property or purchase additional properties. Of course, you could also take that terrific vacation you always dreamed about, though, maybe not the best use of the money.  

Although it is usually to the investor's benefit to do a cost segregation study the first year of owership, properties that have been owned for longer than one year can also take advantage of the tax benefits and cash flow available with cost segregation.

The amount of depreciation can vary between 25% to 50% of what you paid for the property mimus land with the 100% Bonus Depreciation.  Very reliable estimates cost you nothing. 

@Michael Dallas  The two people that commented above have given you some very good information. You may also want to check what the county is using as a land assessed value versus a total assessed value. Dividing the total assessed value into the land value will give you the percentage of your purchase price that is usually used as the land value percentage of your purchase price.  Or, another option is that when your bank does an appraisal, ask for the land value to be included in that appraisal. 

This information is going to help determine how much you can take as Bonus Depreciation in your first year of ownership. Land cannot be depreciated. Once you have purchased the property you will want to get a no-cost estimate for an engineering-based cost segregation study. Don't pay more in taxes than you need to pay. Invest that cash-flow in something that will give you a good return such as improvements or purchasing another property. 

 On a $1 Million property, the buyer/owner would likely have about $60K to $80K in tax benefits the first year of purchase. 

@@Kathy Diamond Have you considered getting a preliminary estimate on what a buyers tax benefits and cash-flow would be with the latest available tax information? This would cost you nothing and could greatly increase your chances of a sale. 

@James Cunningham  You have a great start with your construction backgound. One area that would help you going forward is knowing the available tax benefit and ways to increase your cash-flow for the first year of investment. Cost segregation is just one of the many ways you can leverage one property into higher returns. Few CPAs/tax professionals are up-to-date on the latest information. It is not their fault, there are not enough of them and this is not their area of expertise. They rely on specialists in the RE investment niche. Let me know if I can be of help before you take that big leap.  

@Rohullah Sharifi

There are more pros than cons for cost segregation. If you could secure a loan without interest for as long as you own the property and when you paid it back you had to pay less than you received, why wouldn't you? That is what cost segregation offers you. 

If you plan to sell within 2 or 3 years, you may not want to do it. If you currently pay no taxes, no need for cost seg until you do. 

Cost segregation is all about the time value of money and the value of cash-flow now to reinvest. Another little secret that few know is that if you plan to leave your property to heirs, do cost segregation ASAP because you will never have to pay any of it back and your heirs can do another cost seg upon property transfer. 

@Abhishek Joshi

As others have said, you don't have a lot of options with your current W2 double income which makes your investments passive. Cost segregation is not going to help if you are only breaking even...it just gets you more in losses. 

I suggest that you take a look at your current properties to see if you can increase the rents. Can you make improvements that could allow you to secure higher paying tenants to increase your income? You would also have tax benefits from the improvements but you have to be able to use those benefits. Another option may be to 1031 exchange your current properties into something that gives you a better ROI.

 If you have a specific situation to discuss, let me know. I had a client last week that purchased a building in 2021 and started major renovations in 2024 but didn't finish until early 2025. In this situation, the client received 100% bonus depreciation on the 2021 purchase and 100% bonus on the renovations. Each situation can be so different that it is in an investor's best interests, especially right now during this transition, to get good professional advice in advance. It could save you a lot of money and cost you nothing up-front! 

@Jerry Pfeiffer

Since you inherited the commercial property, you did so at the current market value. This means you can do a cost segregation study on it and maybe other tax benefits as well. This can increase your cash flow for the other purposes you mentioned. You likely have more cash flow available than you may realize.