HOW TO ACCELERATE YOUR PROPERTY’S INCOME TAX DEPRECIATION WITH COST SEGREGATION

BY WALTER DASZKOWSKI

When a taxpayer purchases a rental property, the IRS allows that property to be depreciated over 27.5 years if its residential and 39 years if commercial. However, Specialized Property Engineering & Cost Segregation identifies specific assets within a property that can be depreciated at an accelerated rate of five or seven years for personal property, and 15 years for land improvements. There are specialized companies that perform cost segregation studies, which identify and separate all property assets that qualify for reclassification from real property to personal property or land improvements. Certain reclassified assets can benefit from bonus depreciation as well.

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Cost segregation is an IRS-approved income tax planning strategy used to generate improved cash flow through accelerated depreciation deductions on investment properties, owner-occupied properties, and tenant improvements. To achieve the maximum tax benefit, a Cost Segregation study is recommended to be performed as closely as possible to the date of acquisition or completion of construction.

PROPERTY TYPES THAT QUALIFY
• Apartment Buildings
• Office Buildings
• Garden-Style Apartments
• Industrial Facilities
• Assisted Living Facilities
• Restaurants
• Nursing Homes
• Warehouses
• Hospitals and Medical Centers
• Self-Storage Facilities
• Shopping Centers
• Parking Garages
• Hotels and Motels
• Car Washes

This can be a very effective tax strategy where real estate investors get significant write-offs early in the ownership of the property. To remain cost effective, it should be explored for properties with a cost of $1 million or more.

Walter Daszkowski, CPA, PFS
Daszkowski, Tompkins, Weg & Carbonella CPA,
P.C. 1303 Clove Road, Staten Island T: 718.981.9600 Option
1 / F: 718.981.9601 278 Route 34, Suite 1 & 2, Matawan, NJ wdcpa.com

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