Short term rental - cost segregation to benefit from big beautiful bill

[user17742752833]

I purchased a short term rental and got my cost segregation completed. I dont see ay form in turbotax desktop premium through which i can enter the information with 5, 10,15 and 39.5 year depreciation schedule and also see the losses flowing through my w2 income

[AmyC]

When you enter your rental property/ business, you will see a section for assets. You have to manually "unbundle" the house into separate assets.

Follow these steps:

1. Go to the "Assets/Depreciation" section for this property.
2. Select to add an asset
3. Select "Tools, Machinery, Equipment" or "Furniture."
4. continue
5. Select Office furniture, fixtures and appliances
6. Description - 5 year property
7. Enter date purchased and cost
8. Select I purchased this asset
9. Select yes I've always used for this business
10. Enter the date you began using it for business
11. Deduction options -choose the correct answer for your situation. 
12. continue to end
13. repeat the process of choosing the correct description and flowing through the process for each type. 

A short term rental with stays less than 7 days and services are considered to be more like a hotel (actively involved) than a rental house (passive income). 

Here are some examples of the items in your cost segregation.

5 year property - appliances, electronics (security camera), furniture, lawn mower

10 year property - trees/ vines, electrical grid equipment

15 year - land improvements - fencing, landscaping, pavement, drainage, signage

39.5 year - office buildings, hotels, HVAC, plumbing and wiring, roofing and windows

Looking at your return:

• Open your Form 1040.
• Look at Line 8 (Additional Income) which pulls from Schedule 1.
• If your Schedule E loss is "Non-Passive," it will flow to Schedule 1 and then to your 1040, subtracting from your W-2 total on Line 1.
• Form 4562 shows your rental assets. Each asset has a worksheet.
• Form 8582 is for passive investments and this may not be a passive activity - check your answers.

[user17742752833]

Thank you for providing the instructions. One additional question is do we need to file 179 for the losses to route as an active income/loss to your earnings Or does it happen automatically. Also how do i treat a property that went through significant rennovation/upliftment ? Do i put the acquisition cost as initial acquisition cost or include rennovation cost when adding the property ?

[RobertB4444]

A section 179 deduction is not allowed if your business already has a loss.  

A renovation should be treated as a new asset.  All of the renovation costs should be added up and then the asset is placed into service on the date that you begin using the newly renovated property for business purposes.  You can include your acquisition cost as part of the newly renovated property cost and then depreciate the entire amount.