If you are the owner of an investment property that is worth at least $450,000, or you have had $500,000 in improvements, and you plan to hold on to the property for 3+ years, you may be able to capture thousands in tax benefits.
More depreciation = more paper losses = less taxable income = more money in your pocket
Cost segregation is an IRS-approved powerful tax planning strategy that allows real estate professionals that own short-term rentals (STRs), long-term rentals (LTRs), owner-occupied businesses, and/or commercial property to increase cashflows while generating paper losses that decrease taxes owed.
Typically Residential or Commercial properties depreciate in a straight-line (every year is the same amount) over 27.5 or 39 years.
Cost Segregation is an engineering analysis that breaks up the property into its component parts (cabinetry, fixtures, HVAC, fencing, doors, for example) and assigns depreciation over 5-, 7-, or 15-years which are eligible for additional first year bonus depreciation (currently 80% or 100%).
Depending on the property, as much as 20-40% or more of the building cost may be eligible for accelerated depreciation.
The Result: Depreciation can be front-loaded, resulting in a considerable increase in short-term cash flow and a reduction or even elimination of taxes owed.
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