Segmenting Assets to Accelerate Depreciation Deductions

Rental property is typically depreciated using a straight line over 27.5 years.

It is often better to separate property assets by class life and segment the deductions - this will accelerate depreciation deductions - and for most investors, money now is more valuable than money later.

Do you or people you know do it this way?

If not, why do you think that is?
Is it a hassle?
Does it cost too much?
Do people simply not know?
Are they afraid?

I’m curious to hear what everyone thinks…

Al Aeillo has a program that goes into great detail on the subject. I’m in the process of review and implementation. I have seen copies on ebay for much less than he charges.

This is simply good accounting and tax practice. IRS form 4562 and instructions provide guidance for categorizing assets by expected life span and the acceptable depreciation methods for each. Keeping good records on all capital asset purchases makes the task much easier.

We try to write off as much as possible as quickly as possible. Is that what you meant by segmenting depreciable assets?

I like to buy used stoves, refrigerators and furniture because it is fully deducted the year of purchase. No one knows how long a used refrigerator will last, it could die tomorrow.

New appliances, carpet, fencing have longer life spans. My accountant nails these down at 5 or 7 years. There are charts of depreciable lifespans on these items.

Even a used appliance is a depreciable asset. You are supposed to depreciate that used refrigerator that you bought for $150.

Even though a used applicance is still a depreciable asset, the guidance is to expense it if the cost basis is less than $100.

OK, so I am hearing that most of us here do follow the guidelines.

But IRS Data shows that 78% of investors don’t.

Why do you think that is?