Can I still claim bonus depreciation on STR rentals I built myself? Accelerated tax depreciation options?
I've built roughly 19 short-term rental properties over the last few years. Some were completed and started operating around 2021, while others just went into service this year (2024). I'm kicking myself because I've never taken advantage of the bonus depreciation options that I keep hearing about. Is it too late to go back and claim bonus depreciation on the properties that went into service in 2021? Also, does the fact that I built these rental properties myself (rather than purchasing existing structures) affect my eligibility for accelerated tax depreciation or bonus depreciation? If I can still do this, will the depreciation deductions apply to my 2025 tax liability, or do they have to be applied to the tax years when the properties were actually put into service? I'm planning to find a CPA to help with this, but wanted to get some initial guidance. Really appreciate any insights on accelerated depreciation methods for these STR investments!
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StarStrider
You've got some great questions about bonus depreciation for your short-term rentals! Let me help break this down. Yes, you can still claim bonus depreciation for properties placed in service in prior years, but you'll need to file amended returns (Form 1040-X) for those tax years. The bonus depreciation is tied to the year the property was placed in service, not the current tax year. The fact that you built the properties yourself doesn't disqualify you from bonus depreciation at all. What matters is that they're being used for business purposes (rental activity) and were placed in service during the eligible time period. For cost segregation, this is actually perfect for your situation. A cost segregation study would identify components of your properties that qualify for shorter depreciation periods (5, 7, or 15 years) versus the standard 27.5 years for residential rental property. Many of these components would then be eligible for bonus depreciation.
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Luca Esposito
•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.
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StarStrider
•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.
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Nia Thompson
I went through this exact headache last year with my vacation rentals. After months of getting nowhere with regular tax preparers, I found https://taxr.ai which specializes in real estate investment taxes. They analyzed all my build documentation and receipts and identified thousands in bonus depreciation I was missing out on. Their system specifically flagged items that qualify for 5-7 year depreciation schedules instead of the standard 27.5 years for residential property. The tax savings were significant enough that I was able to expand my portfolio sooner than planned.
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Mateo Rodriguez
•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.
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Aisha Abdullah
•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.
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Nia Thompson
•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.
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Mateo Rodriguez
Just wanted to update after trying taxr.ai for my rental properties. I was hesitant because I only have 3 smaller cabins, but their analysis identified about $78,000 in components that qualified for accelerated depreciation that my regular accountant had missed. They showed me exactly which parts of my builds qualified for 5, 7 and 15-year property classifications versus the standard 27.5 years. The software even flagged specific expenses in my construction records that qualified for bonus depreciation. Already filed amended returns for 2022 and the savings covered the cost of their service many times over!
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Ethan Wilson
If you're having trouble reaching the IRS about amended returns for past year bonus depreciation (which you'll likely need to do), check out https://claimyr.com - it's been a game changer for me. I spent WEEKS trying to call the IRS about my amended returns with bonus depreciation questions and could never get through. Claimyr got me connected to an actual IRS agent in about 25 minutes instead of the usual hangups. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c After finally talking to someone, I discovered I could indeed amend my returns to capture the missed bonus depreciation from properties placed in service in previous years, but there are specific forms and procedures to follow.
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NeonNova
•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.
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Aisha Abdullah
•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.
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Ethan Wilson
•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.
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Aisha Abdullah
I need to publicly eat my words about Claimyr. After dismissing it as likely a scam, I was desperate to resolve questions about my amended returns with bonus depreciation claims before the deadline, so I gave it a shot. Got connected to an IRS agent in about 30 minutes after weeks of failed attempts on my own. The agent confirmed I could file Form 3115 for certain depreciation method changes instead of amending all my returns, which saved me thousands in preparation fees. Sometimes being proven wrong is actually the best outcome!
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Yuki Tanaka
Something important that hasn't been mentioned yet - the bonus depreciation percentage has been phasing down! For 2023 it was 80%, for 2024 it's 60%, and it continues dropping by 20% each year until it's fully phased out. So if your properties were placed in service in 2021/2022, you'd get 100% bonus depreciation when you amend those returns, but for 2024 properties you're looking at 60%.
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Zara Ahmed
•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?
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Yuki Tanaka
•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.
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Carmen Diaz
Has anyone here used a cost segregation study for properties under $400k? I'm wondering if it's worth the expense for smaller STRs or if it only makes sense for larger properties. My tax guy says the study itself might cost more than I'd save in the first year.
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Andre Laurent
•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.
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Sienna Gomez
Great question about cost segregation for smaller properties! I've actually done cost seg studies on properties ranging from $200k to $800k. The key is finding the right firm - some specialize in smaller properties and charge accordingly. For properties under $400k, I'd recommend getting quotes from multiple firms. Some charge a flat fee based on property size rather than a percentage of savings. I paid $2,800 for a $320k cabin and it identified about $68k in accelerated depreciation, saving me roughly $20k in taxes. The sweet spot seems to be properties with significant interior improvements, special electrical/plumbing systems, or unique features like commercial-grade appliances. Even smaller STRs often have these components that qualify for 5-7 year depreciation instead of 27.5 years. Don't let your tax preparer discourage you without getting an actual quote. Many firms will do a preliminary analysis for free to estimate potential savings before you commit to the full study.
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