Rental Tax StrategiesA study is not the strategy

A cost segregation study looks at a building and pulls out pieces that are not the structure itself: certain finishes, certain land improvements, certain personal property. Those pieces can have shorter recovery lives than the 27.5 or 39 year building line they were dumped into. Bonus depreciation may apply at the rate in force on the date the property was placed in service.

The result is timing. You recover cost sooner. You do not create a new economic loss out of nothing, and you do not change the passive activity rules. If the loss is held, a study makes a larger held number. The return you show your family in April can look the same.

We do not perform the study. We do not sign an appraisal. We do not quote a percent of the purchase price as savings, because that percent is a sales figure and your basis, your placed in service date, and your ability to use the loss are the facts that matter.

If you cannot use a loss this year, and you have no passive income to absorb it, the study is early. Order it later if a sale, a change in income, or a real hour log would make the deduction usable. Paying for it now buys a report that waits in a folder.

If you can use the loss, the year the property was placed in service is the interesting year, and a lookback may exist for property already in service. That is a technical path with a form of its own. We will say whether your facts even suggest it. We will not start from a brochure.

A lender who wants a study for a loan is asking for a different work product. That request is not our signature. We can still keep the books so the cost, once known, lands on the right asset line.

Usable or held comes first. Nights come first if you stayed there. Depreciation you skipped comes first if the line is missing, because basis is already affected. The study comes after those answers, not before.

Owners feel pressure from a seller of studies who speaks in refunds. The pressure is real. The refund is not, until the return can use the number. We would rather lose the glamour of a study than watch you pay for a larger loss you cannot deduct.

Tell us whether this year's return can use a loss at all. That fact decides whether a study is early. If the loss would be held, we will say the study can wait, and you can keep the money.