Cost Segregation

Your key to a better return

Keep your cash flowing...

Cost segregation projects allow you to accelerate your depreciation deductions related to real estate holdings. You normally are required to depreciate residential properties over 27.5 years and commercial over 39 years. That is a long time to recoup your investment!

Cost segregation breaks down the building into several components such as HVAC, electrical, plumbing etc. These new assets are granted 5 to 15 year tax lives. We typically see between 20% and 25% of the cost of the property re-allocated to these shorter tax lives. This is shorter than 27 or 39 years, coupled with bonus depreciation and you can create a significant tax loss to utilize against your rental income or potentially wages if you qualify.

For example, you purchased a single family home with plans to have long term tenant for $300,000.

  • Without Cost Segregation depreciation deduction would be about $11,000/year.
  • With Cost Segregation you could accelerate about $70,000 of depreciation expenses this year. With a tax rate of 30% you could save up $21,000!

In order to use your rental loss against your wage or “active” income you either need rental income or qualify for the real estate professional (REPS) tax status or have a short-term rental (STR, Airbnb) whose average length of stay is 7 days or less and which you materially participate in. If you have multiple properties we can make an aggregation election with the IRS to combine your time as one rental activity instead of trying to qualify on a per property basis.

Working with BOSS Advisors we’ll develop a comprehensive plan which includes your real estate holdings.