A Cost Segregation Study: What It Is And How It Works
Author:
Dan RafterApr 17, 2024
•7-minute read
Buying real estate is expensive, and so is renovating a home, store, restaurant or warehouse. Fortunately, real estate investors can turn to a federal tax planning tool that can help them boost their cash flows when purchasing, building or renovating residential or commercial real estate.
Cost segregation can give you the financial relief you need to make it possible for you to invest in or build real estate, even with the high costs of doing so.
What Is Cost Segregation In Real Estate?
Cost segregation is a way for real estate investors to quickly deduct the depreciation of a property – anything from a single-family home to an office building or retail storefront – against their taxable income.
The depreciation of any investment real estate you own can be written off on your income taxes over a period of time and varies depending on the type of investment property. Cost segregation though, allows you to speed up this depreciation schedule, increasing the amount you can deduct each year.
By using this strategy, you’ll reduce the amount of money you owe on your income taxes each year. This also reduces the expenses of owning investment real estate.
Cost segregation is completely based on the depreciation of your investment real estate. Depreciation is a deduction that real estate investors can claim on their income taxes each year to help them recover the cost of owning, operating and maintaining that property.
So how can you get started?