Key Takeaways
- Cost segregation transforms Form 4562 from a single-line entry into a multi-class schedule with 20+ components.
- A master depreciation schedule must be maintained, transferred between CPAs, and reconciled annually.
- Common errors include wrong recovery periods, incorrect methods, missed conventions, and double-counted improvements.
- Bonus depreciation is the default—elect out only if the deduction creates an unusable loss.
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Test Your Knowledge
1.What is the purpose of Form 4562 in relation to rental property depreciation?
2.What is the most common Form 4562 error that triggers IRS scrutiny?
3.How should depreciation schedules be managed for a property with both original components and subsequent capital improvements?