Cost Segregation Studies for real estate owners
how cost segregation studies work
Accelerating depreciation and cash flow
Accelerating depreciation shifts a portion of a property’s cost into shorter-lived asset classes, creating larger tax deductions in the early years of ownership. These increased deductions reduce taxable income and improve cash flow, allowing owners to reinvest capital back into their real estate or business.
Bonus depreciation and timing considerations
Bonus depreciation allows certain assets identified in a cost segregation study to be deducted more quickly, often resulting in significant first-year tax savings. The timing of a study and property placement-in-service date are critical, as changes in bonus depreciation rules can materially impact the amount and speed of deductions.
who benefits from a cost segregation study
Rental Property Owners and short-Term Rental Investors
Rental property owners and short-term rental investors can benefit significantly from cost segregation by accelerating depreciation deductions that offset rental income. When paired with the appropriate activity classification and tax planning, these deductions can meaningfully reduce current tax liability and improve overall investment returns.
Business Owners with Owned Real Estate
Business owners who own the real estate used in their operations can use cost segregation to accelerate depreciation and reduce taxable income at the operating entity or owner level. These tax savings can improve cash flow, support growth initiatives, or help offset profits from the underlying business.
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