Cost Segregation & Depreciation Posts

TL;DR: High-earning W-2 employees don't need real estate professional status to offset active income with short-term rental losses. They use the Short-Term Rental Loophole. The material participation test (500 hours per year, or 100 hours if nobody …

TL;DR: The One Big Beautiful Bill restored 100% bonus depreciation permanently for property acquired after January 19, 2025. This changes acquisition timing, cost segregation value, and the 163(j) interest deduction trade. Recapture at exit is still…

For real estate investors who've embraced cost segregation, understanding the stepped-up basis at death is a critical estate planning strategy. This mechanism can effectively neutralize the depreciation recapture tax that would otherwise burden heir…

TL;DR: Bonus depreciation typically delivers larger first-year tax deductions for real estate investors compared to Section 179 because of no dollar caps, broader asset eligibility (including land improvements), and fewer income restrictions. The On…

Engineering-based cost segregation studies use site inspections, blueprints, and construction documentation to reclassify a meaningful share of your property's cost basis into accelerated depreciation. Residential properties generally land in the 20…

TL;DR: Cost segregation studies reclassify property components into faster depreciation schedules (5, 7, or 15 years instead of 39 years). Residential generally runs 20% to 40% and varies by building. Commercial depends on property type and asset cl…

TL;DR: Three IRS safe harbor elections let you immediately expense repairs and equipment that most CPAs are capitalizing. The de minimis safe harbor ($2,500 threshold), small taxpayer safe harbor (improvements under $10,000), and routine maintenance…

TL;DR:  Repair vs Improvement Deductions. Most CPAs capitalize repair expenses when the IRS regulations allow immediate deductions. This costs business owners and real estate investors tens of thousands in year-one cash flow. The 2014 tangible prope…

I've spent decades watching real estate investors leave hundreds of thousands of dollars on the table. The pattern repeats: they assume their CPA is handling tax strategy when the CPA is only doing compliance. These are not the same thing, and right…

Cost segregation breaks your building into its components so the short-lived pieces depreciate over 5 or 15 years instead of 27.5 or 39. Bonus depreciation then lets you deduct those reclassified assets in full the year the property goes into servic…