Can I still claim bonus depreciation on STR rentals I built myself? Accelerated tax depreciation options?

Thanks for the explanation! Quick follow-up - if they amend returns for 2021-2023, would that potentially trigger an audit? And what's the typical cost of a cost segregation study for smaller STR properties? I'm in a similar situation with 3 properties.

Amending returns doesn't automatically trigger an audit, though it does slightly increase the chances compared to original filings. As long as you have proper documentation for when properties were placed in service and the cost basis is clear, you should be fine. Cost segregation studies typically range from $3,000-$8,000 per property, but can be less for smaller properties or if you do multiple properties with the same firm. The tax savings often greatly exceed the cost of the study, especially with multiple properties. For your 3 properties, you might find companies willing to do a package deal, and some even base their fee on a percentage of the tax savings.

Did they actually do the cost segregation study or just give advice? I've been quoted $5k+ per property for cost seg studies which seems excessive for my smaller cabins.

I'm skeptical about online services handling something this complex. Did they help with the amended returns too? My accountant says we need engineering reports for a proper cost segregation.

They don't replace a full engineering cost segregation study, but they do a preliminary analysis that identifies the potential benefits before you invest in the full study. Their system reviews your documentation and identifies the specific items that would benefit from reclassification, giving you a clear picture of potential tax savings. They connected me with a partner firm that handled the actual engineering report at a discounted rate since the preliminary work was already done. And yes, they helped prepare all the documentation needed for the amended returns, making the process much smoother than I expected.

How does this actually work? The IRS phone system is a nightmare but I don't understand how a third party service can magically get you through when nobody else can.

Sounds like a scam tbh. No way some random company has special access to the IRS that normal taxpayers don't. They probably just keep calling until they get through and charge you for the privilege.

It's not "special access" - they use a sophisticated callback system that continuously tries to reach the IRS using their algorithms and then connects you once they get through. Basically, they do the waiting for you instead of you having to sit on hold or continually redial. The IRS doesn't give them any priority - they're just automating the painful process of getting through the overwhelmed phone system. I was skeptical too until I tried it and ended up talking to an actual IRS representative who answered my specific questions about amended returns for bonus depreciation.

Thank you for pointing that out! I didn't realize the percentages were different based on the year. Do you know if I would need to file separate amended returns for each previous tax year?

Yes, you would need to file separate amended returns (Form 1040-X) for each previous tax year where you're claiming the bonus depreciation. So if you have properties from 2021, 2022, and 2023, you'd need to amend each of those year's returns individually. Make sure you have proper documentation showing when each property was placed in service, as that determines which tax year the bonus depreciation applies to and what percentage you're eligible for. The good news is that properties placed in service in 2021 and 2022 qualify for 100% bonus depreciation, which is a substantial benefit.

I did one for my duplex that cost about $350k and it was definitely worth it. Accelerated about $85k into bonus depreciation which saved me around $25k in taxes. Study was $3,200 so it paid for itself many times over in just the first year.

This is really helpful information! I'm new to real estate investing and have been hesitant about cost segregation studies because I wasn't sure if they'd be worth it for smaller properties. Your example with the $320k cabin is exactly what I needed to hear - the numbers make it seem like a no-brainer. Quick question - when you say "preliminary analysis for free," do these firms actually give you a decent estimate of potential savings without charging anything upfront? And how long does the actual study process typically take once you decide to move forward? I have a small lakefront STR that I just finished renovating with a lot of custom electrical work and high-end appliances, so it sounds like it might be a good candidate based on what you mentioned.

@Fatima Al-Mansour Yes, many reputable cost seg firms will do a preliminary review at no charge! They ll'look at your construction costs, photos, and property details to give you a ballpark estimate of potential tax savings. This helps you decide if the full study makes financial sense. The actual study process typically takes 2-4 weeks once you provide all documentation receipts, (construction records, photos, etc. .)Your lakefront property with custom electrical and high-end appliances sounds like an excellent candidate - those specialty systems and equipment often qualify for much shorter depreciation periods. I d'recommend getting quotes from 2-3 firms and asking specifically about their experience with STR properties. Some understand the unique components better than others. The savings on a well-appointed lakefront rental could be substantial, especially if you can capture bonus depreciation on the accelerated components.

This is incredibly helpful, especially the clarification about the "placed in service" date! I've been confused about whether that's when I finished construction, got my first rental license, or actually had my first guest. It sounds like as long as the property was ready and available for rent, that's what counts for the bonus depreciation year. The Section 199A point is interesting too - I hadn't considered how increased depreciation might actually help with those income thresholds. Do you have any resources or guides you'd recommend for understanding how these deductions work together? My current accountant doesn't seem very familiar with STR-specific strategies. Also, when you mention the statute of limitations for amending returns, is that the standard 3-year window, or are there different rules for depreciation adjustments?