All Forum Posts by: Account Closed

 In your case, might as well just worry about it for next time 

 To answer both your questions, I would recommend you don't engage a real estate-focused accountant until you have at least one property. No need to spend the money yet! 

 hello Shyam, 

You certainly can do a retroactive cost segregation study and either go back and amend your old return or you can take it on this years return. The bonus deprecation rules apply here and it would be a conversation you would need to have with your accountant as to what the best course of action is. I can refer you to someone who does great cost segs, just send me a DM

 Sorry to be the bearer of bad news Ray. I will always shoot strait with you! 

Hey Ray, 

I would exercise caution here. Transferring your Ohio rental property into an LLC after closing could trigger a due-on-sale clause with your lender, as moving the property from personal ownership to an LLC is often seen as a change of ownership. While transferring it to an Ohio LLC owned by a Delaware Holding LLC (which is owned by your Irrevocable Trust) is generally allowed, the lender may require you to refinance or repay the loan if they enforce the clause. To avoid this, it's critical to consult with your lender before making the transfer. While using a quit claim deed could be a way to move the property into the LLC, it won't bypass the lender's potential objections. Additionally, placing the property in an LLC doesn't guarantee privacy for tenants, as they can still access public tax records and potentially trace ownership back to you.

Hey Nick, 

1. Yes, you can take advantage of bonus depreciation when you partner, typically through a simple LLC or partnership agreement. In a 50/50 partnership, each partner generally receives 50% of the tax benefits. However, if you are pursuing Short-Term Rentals (STRs), each partner must qualify individually for "material participation," which can be more challenging when there is a partner. Material participation usually requires that you work more hours than anyone else involved, including your partner, making this qualification tricky in partnerships.

2. Bonus depreciation is highly beneficial because it can be used to offset any income, not just passive or real estate income. It applies to both W-2 income and other forms of active and passive income, meaning that the STR loophole allows you to leverage depreciation beyond just real estate activity.

3. When selling a property, you will have to recapture the depreciation you've used to offset income, but you don’t pay taxes on suspended depreciation. Suspended losses can be carried forward and used to offset capital gains or depreciation recapture upon the sale of the property. If you perform a 1031 exchange, you may avoid immediate recapture taxes, but long-term holding strategies must account for eventual recapture.

4. Depreciation benefits for a property switching from long-term rental (LTR) to STR apply based on the entire calendar year. Mid-year conversions do not qualify for a partial year calculation of STR depreciation; you must meet the full-year requirements to utilize this tax advantage effectively.

5. To meet the "material participation" rules for STRs, there are multiple ways to qualify, but careful structuring is important. Using co-hosts might help distribute management tasks, but this can complicate your ability to meet the material participation requirements, especially the 100-hour rule. Rotating co-hosts for tax purposes may not make business sense, as it is difficult to find reliable management only to replace them quickly.

Hope that helps! 

I get easily 3 calls per week from scammers saying I have overdue taxes.... when will it end! 

Love this article, Melanie! Great breakdown of Bonus depreciation for RE. But the goodness doesn't stop there. Bonus deprecation can be used on equipment and vehicles too. This leads to the famous "g wagon write off" which a lot of our real estate brothers and sisters are interested in doing 

 Appreciate the post! My buddy actually lives in Henderson, so perhaps picking a place close to that would be the move and get it at a 6.5-7 cap. Don't really care about price and short term appreciation, just cashflow and hassle to manage 

 Thank you for the thoughtful post! i will consider Reno as well. I just don't want to do CA and know a friend that lives in vegas, so I have some idea of how it is there and its a quick flight from where I live. This is just a cashflow and hold forever play. Id like to build a bigger portfolio but this would be my first non LP deal where I'm doing all the work myself so I thought id start between beginner mode and intermediate.