Real Estate Tax Hacks: Cost Segregation & Bonus Depreciation for Big Saving

In this episode of "Real Deal Investing", host Jerron Kelley, a seasoned real estate attorney talk with Kim Lochridge, an expert in cost segregation and tax strategies for real estate investors.

Kim is from Engineered Tax Services and she shares invaluable insights on tax savings strategies specifically designed for sophisticated real estate investors. Kim, an experienced investor herself, highlights the importance of cost segregation, a method of accelerated depreciation that allows property owners to categorize and depreciate assets within a property more rapidly than traditional methods. Unlike standard straight-line depreciation, which spans 39 years for commercial properties and 27.5 years for residential ones, cost segregation enables investors to write off components like carpets and HVAC systems over shorter periods—sometimes as little as five years.

The discussion clarifies common misconceptions about cost segregation, emphasizing that it applies exclusively to income-generating properties, not primary residences. Kim underscores the importance of engaging engineers to conduct cost segregation studies, as they are essential for accurately assessing the value of various components within a property. Additionally, she explains the IRS’s preferred methods and guidelines for cost segregation, reinforcing the method’s legitimacy and potential tax benefits.

Furthermore, Kim discusses eligibility for cost segregation studies, which can apply to new constructions, renovations over $50,000, and even improvements in leased spaces. She reassures attendees that even if they missed the opportunity to apply cost segregation at the time of purchase, they can still benefit from it retroactively.

Kim's presentation serves as a comprehensive guide for real estate investors looking to maximize their tax savings through effective strategies like cost segregation and bonus depreciation.