Posted by Kenneth Hocking on March 26, 2008 at 09:05:52:
Residential Cost Segregation Anyone?
Here is the little I know as I am investigating this idea and I am looking for input.
A rent house can be broken down into its construction components ( carpet, doors, Wiring, cabinets Etc etc) with the aid of a Cost segregation company like Redtec Solutions LLC out of Phoenix or Mike Fitzgerald of Fitzgerald Financial Partners out of Houston. I am sure there are others.
Then these building components are put into various life-span/depreciation “buckets” 5, 7, 15, 20, 27.5 year I think.
Anyway the Layman version is that the Total Value of the building is re-allocated into SHORTER life-spans thus accelerating depreciation over the structure quicker giving more write offs in the closer years. Great concept and looks to have decent impact.
But here is the same idea on a bit of SPEED. Given the new section 179 provisions of the stimulus plan for 2008 I wonder if one could accelerate the Cost Seg buckets that are under 20 year life span into this initial year .... up to the increased cap of course...
On a typical Cost seg my understanding is that 40-55% of the building will fall within the 15 year or less buckets
Have your smart CPA friends look into this idea....
Buy a 120K Rent home this Year.... Have a Cost Seg. study completed and then take the 20 year and less components in an accelerated fashion THIS YEAR if this idea is right means you “could” take 48-66K in depreciation this Year... since it seems Congress has said its ok to do so... again check with your CPA about the accelerated Section 179 Deductions allowed this year!.
Just a thought to throw out to the wolves of Knowledge to CHEW on.Also keep in mind that "special" section 179 deductions “may” be recaptured at Ordinary Income so make sure to 1031 out of the property later and definitely check with a CPA on this but it did wake me up at 3 am this morning!
What if this is right! Let me know what you guys think!
- Be careful-don't create a negative tax shelter Allen Bailey 13:45:03 03/30/08 (1)
- Can 179 Deductions be rolled forward 1031? Kenneth Hocking 21:05:59 03/30/08 (0)
- Re: Cost segregation Gets a Boost? Dave T 18:34:19 03/26/08 (3)
- Great Information Kenneth Hocking 20:10:30 03/26/08 (2)
- Re: Great Information Dave T 13:59:00 03/29/08 (0)
- Re: Great Information Len 22:58:13 03/27/08 (0)
- Re: Cost segregation Gets a Boost? Penny 09:10:43 03/26/08 (0)