The Real Estate Investor’s Guide to Cost Segregation

If you are a real estate investor, you know that one of the keys to success is maximizing your deductions come tax time. Did you know that there is a way to accelerate the depreciation of your investment property? It is called cost segregation, and it could save you thousands of dollars a year in taxes. Here is what you need to know about this powerful tax planning strategy.

What is Real Estate Cost Segregation?

In short, cost segregation is the process of identifying personal property components within a building that can be depreciated over a shorter schedule than the building itself. These personal property components could include things like carpeting, lighting fixtures, and appliances – basically, anything that is not permanently attached to the structure of the building.

A cost segregation study is an analysis of a property that is used to identify personal property components that can be depreciated over a shorter schedule than the building itself. This process is often conducted by a qualified cost segregation specialist.

Why Should I Care?

The primary benefit of cost segregation is that it allows real estate investors to accelerate the depreciation of their investment properties, which translates into more deductions come tax time. When done correctly, cost segregation can save investors thousands of dollars a year in taxes. 

How Do I Get Started?

If you are interested in pursuing cost segregation for your investment property, the first step is to find a qualified cost segregation specialist. This person will conduct an analysis of your property and identify which components qualify for accelerated depreciation.

Cost segregation is a powerful tool that every real estate investor should be aware of. By taking advantage of this strategy, you can save yourself thousands of dollars a year in taxes. If you are interested in pursuing cost segregation for your investment property, the first step is to find a qualified cost segregation specialist.

What is the purpose of a Cost Segregation Study?

A cost segregation study’s purpose is to identify any property-related costs that qualify for accelerated depreciation over five, seven or 15 years—or can be fully written off using bonus depreciation through 2022.

Your advisory team may look at available property records, inspections, cost information, and blueprints before making a decision to offer or purchase a home. They will also do a physical inspection of the property.

Cost Segregation Study Example

For example:

If you choose to get a cost segregation study, your advisory team will identify the following costs:

Jose A. Ramirez is an experienced and sought-after tax strategist who helps investors through the process of cost segregation. He specializes in Short-Term Rentals such as AirBNB and VRBO, Landlords, Wholesalers, Rehabbers, Flippers, Real Estate Brokers, and Realtors. Schedule an appointment with Jose A. Ramirez for any additional questions you may have about this recent event. Make sure you are subscribed to the Advanced Tax Advisors email list so you can receive current events just like this in the future.