Can You Cost Segregate Your Home or Former Residence?

Start with how the home is used

Owning a home alone does not make it a cost segregation candidate. Depreciation generally concerns business or income-producing use. A purely personal residence, a fully rented former residence, and a house with one rented room need different facts. Describe the actual use rather than treating every homeowner as a rental investor.

For a conversion, establish the starting basis

A former personal residence can require a depreciation basis using the lower of adjusted basis or fair market value at conversion. Give the preparer purchase and improvement records plus support for conversion-date value. Refinancing proceeds and today’s listing price are not substitutes for that analysis. Separate land and keep the conversion calculation with the study file.

For shared use, map the rental portion

Document which rooms or units are rented, which spaces are shared, and the dates of each use. A duplex owner living in one unit should not assume the whole building has the same tax treatment. The allocation needs to reflect the facts, and furnishings or improvements serving only one portion should be identified separately.

For a vacation home, record personal stays

Collect the rental calendar and owner-use history before estimating a usable deduction. Personal-use rules can limit deductions, and a short booking duration does not by itself establish the owner’s tax treatment. Ask the preparer to settle the use and basis questions before the study provider applies component analysis to an agreed cost pool.

Continue with your property decision