When Does Using a Cost Segregation Study Makes Sense?

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In today's video, Thomas will discuss when it is appropriate to use a cost segregation study.
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Опубликовано:

27 июл 2022

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Комментарии : 28

@bryanhuang281 28 дней назад

what is the average savings for year 2? everyone only talk about year 1 saving but not year 2.

@TheRealEstateCPA 22 дня назад

In year two, there can still be some losses however they are generally much lower because the bulk is taken in the first year using bonus depreciation.

@SgtSam1 Год назад

Great info, thanks! I have a W-2, so I am not REP but I do own and operate a STR. It sounds like Cost Seg may be beneficial for me. My question is, what happens when write-offs & bonus dep combine for more than what you would owe in taxes? Does that come back to me in form of a refund or does it carry over into the next year? Thanks!

@TheRealEstateCPA Год назад

The excess losses are generally carried forward to the next year as a net operating loss (NOL)

@WholeSomeCrumb_SF Год назад

Hi, Once Cost seg is done and the loss is categorized in the passive side, does the loss stay on the passive side forever? One day, if the property owner can qualify as non-passive ( real estate professional status), can that loss be transferred to the active side? thanks for this video!

@TheRealEstateCPA Год назад

Once on the passive side, the losses remain passive until you have passive income or gain on sale from a rental. The losses will still be passive even if you qualify for REPS in future years.

@adamsaff2009 8 месяцев назад

Is the seg study only available in the first year after I own the property? or can I do it after couple of years of owning the property? after I fix it and put it in the short term rental service?

@TheRealEstateCPA 8 месяцев назад

Yes, it is possible to do a cost seg study after the first year.

@cainvestor Год назад

Does it make sense to do a Cost Seg a flip but with rental period between purchase and rehab? For example, I purchase a property with tenants in place, I do a Cost Seg study. The tenants moves out after a few months. I rehab and then sell the place. Can I use that Cost Seg to write off/expense the items that I replace when I sell?

@TheRealEstateCPA Год назад

Hard to answer that question without more details about your entire situation. However, properties held for resale (i.e. flips) are generally not depreciated and thus a cost segregation study generally doesn't make sense.

@marandacarr2200 Год назад

Does it make sense to do a cost segregation study in California, if California does not recognize full bonus depreciation? We just purchased our first short term rental and plan to use the short term rental loop hole against our full time w2 jobs. The rental will be active in October 2022 and we plan to materially participate and manage it ourselves. Thanks

@TheRealEstateCPA Год назад

You can still use bonus depreciation at the federal level - which is where the majority of your tax is paid, so generally yes.

@halliecohen2694 Год назад

If you placed in service your property in year 1 and in year 2 had the cost Seg done. What are the next steps? Do you amend? Do you reverse year one income?

@TheRealEstateCPA Год назад

It depends on the situation and your goals. If you had the cost seg done in Y2 but still need to file Y1's taxes, you could still have the study reported on Y1's return before filing. However, if you already filed Y1, it's generally possible to go back and amend Y1's if Y2's return hasn't been file yet. Lastly, if you filed Y1 and want the losses applied to Y2, you need to report the study in Y2, which generally come with additional reporting requirements such as a 481(a) adjustment and Form 3115.

@user-oj9nb4gl3m Год назад

similar question: if purchased and placed in service in 2021, filed 2021 taxes timely (without cost seg), and filed extension for 2022 taxes, can cost seg study be performed today (year 3) and used to amend 2021 taxes? or only for filing 2022 taxes? Thanks!

@TheRealEstateCPA Год назад

@@user-oj9nb4gl3m If you still haven't filed 2022's taxes, you can still typically amend 2021's tax return. However, once you file 2022's taxes, you will have officially adopted an accounting method and need to file Form 3115, a change in accounting method to fix it.

@keevintyus2102 11 месяцев назад

If I have had a property for 4 years now and I want to fix it up and rent it out can I still use cost segregation even though I haven’t started renting it out yet?

@tax-modern 2 месяца назад

You can do the study at any time, but it won't benefit you until the tax year that you put the property in service as a rental. You can't claim any depreciation (or actually, any expenses on it) until it's in service as a rental.

@FlyFishingRealtor Год назад

If we are able to take 25k in losses a year then you would need almost 700k in properties before creating more depreciation than that. Not including mortgage interest loss and other expenses. I don’t mind carrying losses forward into retirement when I’ll have more rental income than depreciation. My question is the 5-15 year pieces of property: when you need to replace those, how can you get new depreciation for those if you are still depreciating the originals over 27.5 years?

@TheRealEstateCPA Год назад

You would have them on your balance sheet and depreciation schedule once you replace them and they would be depreciated over 5-15 years unless they qualify for bonus depreciation still. You can also generally deduct the remaining value of those components using what's known as a "partial asset disposition" in the year they're replaced so they are no longer being depreciated. The remaining value can be determined with a cost seg study too

@imnoteddie Год назад

Does a Cost Segregation Study to use bonus depreciation make sense for small multifamily with a property value under 200k?

@marinawong9662 Год назад

Usually the cost seg creates between 10-20% of the purchase price of the property as depreciation. Just my observation as LP in syndications

@TheRealEstateCPA Год назад

It can. Generally on a property that size you want to consider a software study.

@marinawong9662 Год назад

I don’t really understand your number 3 because isn’t LT capital gain tax is capped at 20% tax rate? Why do we want to save 20% when we have to pay 25% down the road for recapture?

@TheRealEstateCPA Год назад

Time value of money. $1 today can be invested and you can earn a return on your $$$

@dwadholm1 Год назад

@@TheRealEstateCPA In reality, it is the perceived benefit of getting that cash today at the cost of tomorrow. You could also argue that as assets depreciate normally and net income rises you are more likely to need that in the future... If you are holding the property for 15-20+ years these gyrations to save on taxes today are generally not worth the hassle.

@marandacarr2200 Год назад

@TheRealEstateCPA Год назад

You can still use bonus depreciation at the federal level - which is where the majority of your tax is paid, so generally yes.