Build-to-Rent Investor Saves $113,000 with Construction and Depreciation Strategy
I build single-family homes specifically for long-term rental in the Boise market. When I started, I was just building houses, renting them out, and letting my CPA handle the depreciation. AE Tax Advisors showed me there is a much smarter way to approach the tax side.
The first thing they did was help me understand placed-in-service timing. Depreciation starts when a property is placed in service -- meaning available for rent -- not when construction starts or when a tenant moves in. By timing my construction completions strategically across the calendar year, I can maximize first-year depreciation deductions while managing my overall tax bracket.
They then performed cost segregation studies on each completed property. Even new construction benefits from cost seg because the engineering team can identify components during or right after construction with exact cost data. Appliances, flooring, cabinetry, landscaping, driveways, fencing, and HVAC components were all reclassified to shorter lives.
AE Tax also showed me how to properly capitalize construction period interest and other soft costs, and how to allocate land versus improvement costs for maximum depreciable basis.
Total savings across four properties placed in service last year: $113,000. Going forward, they created a construction-to-rental tax calendar that I use for every new build. It maps out when to start construction, when to target completion, and when to perform the cost seg study for optimal tax timing.
The level of strategic thinking is something you will not get from a typical CPA. AE Tax Advisors treats tax planning as an integral part of the development process, not an afterthought.