Chapter 3 Introduction

By Jason Watson, CPA
Posted Sunday, May 25, 2025

Chapter 3 focuses on setting up your rental property correctly from the start to ensure tax compliance, proper housekeeping and maximum rental property tax deductions. It begins with what to do immediately after acquiring a rental—such as determining when the property is “placed in service,” separating building from land value (important for depreciation and cost segregation), and capturing all acquisition-related costs (the often forgotten tax reduction chore). This foundational setup is critical because it defines when depreciation begins and what expenses are deductible. The key? Placed in service! Say with us, “buy today, in-service by close of business.”

Ok, we took that too far.

The chapter also explains how to categorize and allocate common rental launch expenditures like loan fees (also forgotten frequently), appraisals, inspections, furnishings and supplies. We discuss what gets capitalized, what can be expensed, and when, with a lot of attention on closing disclosure or settlement statement matters. The chapter also covers best practices for asset categorization and the advantages of separating multi-unit properties into distinct tax return fixed asset entries for flexibility and the mechanics of moving your rental property into an LLC.

This chapter is short and sweet. The introduction might be like a movie- all you need is the trailer.