Questions rental owners ask us

By default, the IRS treats your whole rental as one building and spreads its cost over 27.5 years (or 39 for most short-term rentals). That isn't how a house is built. Carpet, appliances, cabinets that aren't built in, light fixtures, the fence and the driveway wear out much faster.

A study identifies those parts and puts them on 5-year and 15-year schedules. With bonus depreciation, those shorter-life parts can be deducted in the first year instead of trickling in over decades.

Any residential property you rent out or hold to rent: single-family homes, condos, townhouses, duplexes to fourplexes, apartment buildings, cabins, ADUs, and the rented part of a home you live in. It must have been placed in service after 1986.

Your own home doesn't qualify while you live in it. When you convert it to a rental, depreciation starts on the lower of what you paid (plus improvements) or its market value on the conversion date.

Usually, yes, once the depreciable basis (price minus land, plus improvements) is above about $150,000 and you can use the losses this year or soon. A $300,000 house with $60,000 of land often produces $60,000–$90,000 of extra first-year depreciation.

It's often not worth it if you plan to sell within a year or two, if land is most of the value, or if you're in a low bracket with no way to use the losses. The calculator shows the trade-off, and we'll tell you if the fee doesn't pay for itself.

Not automatically. Rental losses are passive by default, so they offset passive income first and carry forward if unused. There are three ways to use them against wages.

First, the short-term rental route: if the average guest stay is 7 days or less and you materially participate (commonly 100+ hours and more than anyone else, cleaners included), the activity is not treated as passive.

Second, real estate professional status: more than 750 hours a year and more than half your working time in real estate, plus material participation in the rentals.

Third, the $25,000 allowance for active landlords, which phases out between $100,000 and $150,000 of modified adjusted gross income. Your CPA decides which applies to you.

The 27.5-year life is for buildings that earn at least 80% of rent from dwelling units, and a unit rented mostly on a transient basis (mostly stays of less than 30 days) doesn't count as a dwelling unit. Many CPAs therefore put Airbnb-style rentals on 39 years.

Others use 27.5 years for a single house on the view that the transient rule targets hotel-like establishments. Practitioners disagree. Our calculator defaults short-term rentals to 39 years and lets you switch. The difference to your first-year savings is small either way.

The One Big Beautiful Bill Act, signed July 4, 2025, made 100% bonus depreciation permanent for property acquired and placed in service after January 19, 2025. Only the 5-, 7- and 15-year parts a study identifies qualify; the building itself never does.

Homes under a binding purchase contract before January 20, 2025 keep the older phase-down: 60% if placed in service in 2024, 40% in 2025, 20% in 2026. You can also elect out of bonus by asset class if a smaller first-year deduction suits your plans better.

No. A look-back study works on any rental placed in service after 1986. Your CPA files Form 3115 (an automatic change in accounting method) and takes all the missed depreciation as a single catch-up deduction in the current year. No amended returns.

The shorter-life parts use the bonus rate from the year the rental was first placed in service. A 2022 rental still gets 100%, a 2023 rental 80%.

No. The study needs to be done before you file, and that includes extensions: April 15, or October 15 on extension, for most individual owners. What does have to happen by December 31 is placing the rental in service if you want the deduction on this year's return.

Some of it. On a taxable sale, depreciation on the 5-year parts is recaptured as ordinary income, and depreciation on the building and site work is taxed at up to 25%. Recapture only applies to gain; if you sell at a loss there is nothing to recapture.

Even so, a deduction today at 32–37% that's repaid years later is usually worth more than the same deduction spread over 27.5 years. You can also defer with a 1031 exchange, and heirs receive a stepped-up basis that wipes out recapture. If you expect to sell within two years, a study may not pay off. Ask us and we'll model it.

A study doesn't trigger audits by itself. What draws scrutiny is a poor study: rule-of-thumb percentages, no documentation, contingency fees, or an unrealistically low land value. Ours document every asset, its cost basis and the rule that puts it on a shorter schedule.

If the IRS asks about your study, we answer in writing about our method and classifications at no charge. We don't represent you before the IRS. That's your CPA's or attorney's role.

Yes. Capital improvements (remodels, new flooring, appliances, decks, fencing, landscaping) add to your basis and often contain a high share of 5- and 15-year property. Routine repairs don't belong in a study; they're deducted as repairs.

If you replaced something that was already being depreciated, like a roof or cabinets, the remaining basis of the old item can often be written off through a partial disposition election. Don't include costs you already expensed, or they'll be counted twice.

The Express Study starts at $895 for single-family homes, condos, townhouses and up-to-four-unit properties with a depreciable basis under $1.2 million and under $80,000 of renovations. The Engineered Study starts at $1,950 and covers everything else, including apartment buildings and heavily renovated homes.

Your proposal states a fixed fee before you pay anything. No contingency fees, which the IRS treats as a red flag.

Express Studies are delivered in about 5 business days after you finish the property questionnaire. Engineered Studies take 15–20 business days after the virtual walkthrough and documents. Rush delivery is available close to filing deadlines.

Express Studies don't require a visit. They're built from a detailed questionnaire, your photos and your closing documents, then reviewed by an engineer. Engineered Studies include a 30–60 minute video walkthrough where you or your property manager walk us through the home on a phone.

The IRS doesn't require an in-person inspection. Its Audit Techniques Guide cares that the study is documented and the method is sound.

Your closing statement (or Closing Disclosure / HUD-1), the property address, the date it was first rentable, and a list of renovations with rough costs. Prior depreciation schedules if the rental is already on your return. Photos help for Express Studies.

No appraisal needed. We use county assessor data to support the land and building split unless you have a better figure.

You get a PDF report explaining the method and every classification, plus a fixed asset schedule in Excel with the cost, recovery period and method for each asset, ready to enter into their tax software. If your CPA has questions, we'll get on a call with them.