November 25, 2025

Can You Do A Cost Segregation Study On Property In A Qualified Opportunity Zone Fund?

57 minutes

In this episode, Anderson Advisors Barley Bowler, CPA, and Eliot Thomas, Esq., tackle listener questions on critical tax strategies. They cover the differences between Section 179 expense deductions and bonus depreciation, including how to combine them effectively and avoid creating excessive losses. Barley and Eliot discuss the timing of equipment purchases for tax planning purposes and explain the complexities of equipment leasing investments, emphasizing the importance of material participation tests. They address the mark-to-market election for active traders and explain why Anderson doesn't recommend this strategy due to audit risks. The attorneys clarify that qualified charitable distributions can only be made from IRAs, not Solo 401(k)s, and explore strategies for using IRA withdrawals to purchase rental properties while offsetting taxes through cost segregation studies. They also explain excess business loss limitations, the interaction between cost segregation studies and qualified opportunity zone funds, and why 1031 exchanges cannot be used to avoid capital gains tax deferrals ending in December 2026. Tune in for expert guidance on these advanced tax topics!

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Highlights/Topics:

"How can I take advantage of tax code 179, Section 179?" - Section 179 allows immediate deduction of qualifying business equipment expenses.

"If I have more business items to buy like a desk, should I buy them before the end of the year? Or maybe I wait to the new year? When do I buy these things?" - Purchase timing depends on which year needs the deduction more.

"If one invest in an equipment leasing investment in 2025, and it's active, and writes off 100% of the equipment cost in 2025, but then in 2026 no longer active, does the income revert to passive income or is it still active for 2026?" - Active losses remain locked in; only future income becomes passive.

"Can I still take the IRS mark-to-market election for the tax year starting January 1st 2026?" - Election must be made on 2025 return by April 15th.

"I have a Solo 401(k). First of all, how does this work? And can I make qualified charitable distributions from my Solo 401(k)? Plus do these tax-free distributions go on my 1040 as a deduction?" -QCDs only work from IRAs, not Solo 401(k) retirement plans.

"Is there a cap on how much money I can withdraw per year from my traditional IRA to purchase an income-producing rental property? What are the things I need to consider before making this decision? I'm 55 years old and I am aware of the 10% penalty." - No cap exists; expect regular income tax plus 10% penalty.

"Is there an annual cap on bonus depreciation? Is there a limit on how much bonus depreciation we can take?" - Excess business loss limitation caps deductions at $313,000 single, $626,000 married.

(44:44) Title question "Can I do a cost segregation study on a property that's in a qualified opportunity zone fund? How does this impact the capital gains tax deferral that ends in December of 2026?" - Yes; cost seg helps operations but doesn't offset deferred gains.

"Can I do a 1031 exchange and avoid the tax due when the deferred tax comes due in 2026?" - No; cannot use 1031 to avoid QOZ deferred capital gains.

Resources:

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