Thomas Castelli
Thomas Castelli has been a guest on Collecting Keys, the real estate investing podcast hosted by Mike DeHaan, Dan Austin and Dylan Koch.
The Truth About Accelerated Depreciation & RE Professional Status w/ Tax Strategist Thomas Castelli
Tax strategist and CPA Thomas Castelli walks through how real estate investors should actually think about accelerated depreciation, cost segregation studies and real estate professional status. He explains when a cost seg is a bad idea, how depreciation recapture can be taxed at ordinary income rates, and what the IRS really looks for when it comes to material participation and hour tracking. He also covers how to vet a real estate-focused CPA and the most common filing mistakes he sees.
Key takeaways
- Passive losses don't get unlocked retroactively — losses suspended before you qualify as a real estate professional stay passive, so it can be smarter to delay a cost seg until the year you actually qualify.
- Skip the cost segregation study when you're flipping (Schedule C, no depreciation), when you plan to sell in one to three years, or when you're in a low bracket today and expect to sell in a higher one without a 1031.
- Straight-line depreciation recapture maxes out at 25%, but the bonus depreciation portion is recaptured at ordinary income rates up to 37%.
- Roughly 20-30% of a building typically qualifies for bonus depreciation; on a $500K property with 80% building value, that's about $100K eligible, and at 2024's 60% bonus rate, roughly a $60K deduction.