Let's face it, owning investment property is a fantastic way to build wealth. But what if you could tap into even more hidden value while you're at it? Introducing the cost segregation study, your financial superhero hiding in plain sight when it comes to maximizing your deductions and boosting your tax savings.
A cost-segregation study is an engineering study you can have done on either residential or commercial property, that divides up the building components into different depreciation lives.
Why this is important is because it allows you to take more depreciation in earlier years, as opposed to if you just use the standard depreciation lives (27.5 years for residential and 39 years for commercial).
It’s a very bad idea to do your own cost-segregation study since it will be difficult to have the supporting evidence to justify why you decided to allocate the assets and depreciation a certain way. An actual engineering study will provide the supporting evidence needed to take this deduction (I’ve seen these starting at about $1,500).
The couple of clients I’ve had do these on residential rental properties were able to push $100k in depreciation to the current year, and save roughly $30k on taxes, so the $1,500 was well spent.
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