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We are looking at putting an offer in on another rental. Are there any benefits to closing in December vs January? The thing that comes to mind is depreciation. Would we take a full year of depreciation for a week or two of December ownership or is it prorated?

TIA,

IP
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The thing that comes to mind is depreciation. Would we take a full year of depreciation for a week or two of December ownership or is it prorated?

It's prorated, and the first month you only get 1/2 month's depreciation. And the first month only starts when it's put into service as a rental. So, the key is - when are you going to put it into service as a rental (i.e. start advertising it for rent, etc.) vs. when you close. See IRS Pub 527 https://www.irs.gov/pub/irs-pdf/p527.pdf for more details.

AJ
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And the first month only starts when it's put into service as a rental. So, the key is - when are you going to put it into service as a rental (i.e. start advertising it for rent, etc.) vs. when you close. See IRS Pub 527 https://www.irs.gov/pub/irs-pdf/p527.pdf for more details.

Thanks. It's a duplex and we will be inheriting tenants til mid year, so comes already rented. But this tells me it's not an issue giving the owners their wish to hold til January. Doesn't lose us much and makes us a better buyer since we know they would like to collect a couple more months rent.

IP
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If you are looking for additional tax advantages in 2019 you might be able to use an accelerated depreciation approach to front load the depreciation and get larger tax deduction.
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Thanks for the suggestion.

IP
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If you are looking for additional tax advantages in 2019 you may be able to use an accelerated depreciation approach to front load some of the depreciation into the 2019 tax year, if you purchase in 2019. Could do the same in 2020, depends on when you want the possible tax advantages.
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Sorry for duplicate post.
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If you are looking for additional tax advantages in 2019 you might be able to use an accelerated depreciation approach to front load the depreciation and get larger tax deduction.

Real estate is not eligible for any accelerated depreciation. It's straight line depreciation with a mid-month convention (the property is considered placed in service for 1/2 of a month in the month is is placed in service).

That said, it is possible to segregate out some assets from the property and get accelerated depreciation on those assets. But for a typical single family residential rental property, we're not talking about a lot here - arguably not enough of a difference to pay for the time and effort of separating those assets out.

--Peter
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Real estate is not eligible for any accelerated depreciation. It's straight line depreciation with a mid-month convention (the property is considered placed in service for 1/2 of a month in the month is is placed in service).

That said, it is possible to segregate out some assets from the property and get accelerated depreciation on those assets.


I am however looking at making one of the units I am buying a 30 day plus furnished rental. It's as close to a vacation rental as I can get here without it being our primary residence. So we would be buying furniture, electronics, decorations and kitchenware, all of which adds up quickly. Would this not qualify for accelerated depreciation?

IP
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We have had estimates prepared for our single family rentals and found the cost segregation analysis/accelerated depreciation to be quite favorable if you have sufficient income to take advantage of the accelerated deductions.

There are companies that will provide a no cost estimate of both the potential tax impact and of their fee to prepare the detailed segregation analysis so you can make a decision to go forward or not.

A short term rental property sounds like a good candidate
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I am however looking at making one of the units I am buying a 30 day plus furnished rental. It's as close to a vacation rental as I can get here without it being our primary residence. So we would be buying furniture, electronics, decorations and kitchenware, all of which adds up quickly. Would this not qualify for accelerated depreciation?

Yes. Those items would qualify. Just not the building itself.

--Peter
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