All Forum Posts by: James Parrish

Many specialists in this forum serve the lower 48 if you're looking to maximize the tax benefit

Hi Alex,

Yes you can, these type of studies are called "look-back" studies and do not require amending tax returns. This type of property should also be eligible for bonus depreciation.

@James Choi as a fellow New Englander I can introduce you to a few CPAs in the region. DM me at anytime

Cheers!

The quality of a cost segregation study will DEFINITELY vary based on the firm you hire. This is because the IRS provides a framework for cost segregation, not a bright light method.

The cheaper ones are not as thorough and will not generate as many deductions, they also typically do not go the extra mile and work with your tax preparer to implement the study. One question you should always ask is if the firm performs engineering-based cost segregation studies. This is the highest quality of study that you can get - this type of study will also perform well under audit. 

Hope this helps!

@Margaret Feit A lot to unpack here. Furniture, fixtures, equipment, and other components can be categorized as personal property and depreciated over 5 years. The sum of these items will be entered as one line item on your tax return. Similar totals will be entered individually for 7,10, 15, 20, 25, 27.5, and 39-year property (if any), together the sum of these individual entries (plus a land allocation) will create your initial cost basis. In your scenario, straight-line depreciation will be 39 years, not 27.5, due to your property's STR status. Another thing to note; to maximize allocations to 5 and 15-year accounts people usually order a cost segregation study, which maximizes depreciation deductions in the near term - a well published topic throughout this forum.

This is a very tricky subject that requires much more information to answer - If you're looking for service feel free to reach out to one of the many professionals in this forum.

Have to agree with @Bonnie Griffin Kaake this can all be mitigated through open communication between the cost segregation firm and the CPA. This is also the unfortunate result of choosing the lowest bidder. The drive-by night cost seg firms will not collaborate with the client's CPA. A quality cost segregation firm will.

Years owned isn't the determining factor, what matters is the current basis of each building, which is the building's value minus previous depreciation (to summarize). If a rental home has a remaining basis of less than 200,000 then the benefit would be marginal. 

@Les Jean-Pierre STRs are dwelling units that are rented for a period of 7 days or less, whereas LTRs are traditional rental properties. STRs, like other businesses, have similar deductions such as utilities, supplies, and depreciation. What separates an STR from an LTR (if this is what you're looking for) is that STRs can activate losses using material participation rules instead of the more stringent real estate professional rules. This is because STRs, like hotels, are treated as nonresidential real property and fall under different tax regulations.

To my understanding, this is what people are typically referring to when they mention "STR deductions" or "STR losses"

Hope this helps!

To add to what @MichaelPlaks said, there are rumors that congress already wants to "solidify" 100% bonus instead of letting it sunset. 

@Lucas Ayers

It's actually better if you perform a cost seg study before the improvements are made. This way the cost seg provider can help quantify existing assets, retire them, and then cost segregate the replacements. This can get quite complicated though, so using a tax professional is recommended. If you're having trouble finding one for the '22 tax year I'd be happy to put you in touch with someone.

Cheers