If you're a real estate investor who hasn't taken advantage of cost segregation, you may be leaving money on the table. Do you like wasting money? Think of it this way, the money that you can keep in your pocket from a cost segregation study could help you purchase your tenant's broken AC (in cash!). Most likely, the money you could save would equal multiple AC units. Do I have your attention yet? If you're unsure of what cost segregation is, I highly recommend reading our blog to get familiar with this savvy tax planning strategy. To better sum it up check out the below top five reasons why real estate investors need cost segregation.
1. Cost Segregation is a great strategy for helping you grow your net worth faster by significantly reducing your current tax liability, using the upfront cash for additional investing.
2. There are no rules when it comes to what you do with the cash you save on your taxes. Wise real estate investors typically use the cash to make improvements on their property or even as the down payment to their next acquisition.
3. The benefits of cost segregation are comparable to borrowing money from the government –interest-free
4. Cost segregation accelerates the depreciation of certain components of a property quicker than a regular depreciation schedule. Instead of depreciating these components over 27.5 years, depreciation is accelerated to 5, 7, or 15 years.
5. Cost segregation can be done any time during ownership. The caveat to this is if you do cost segregation after closing, or during the first-year of ownership, you will capture more depreciation.
As you can see, the above reasons are worthy of exploring no matter where you are in your real estate investing career. The reason why many real estate investors don't take advantage of cost segregation is for two reasons - they've never heard of cost segregation or they think the ROI isn't there. The truth is, cost segregation misconceptions often trump reality, making this tax strategy undermined.
As a real estate investor, the least you can do is ask your CPA if cost segregation makes sense for you. Everyone's financial situation is different. We want to make sure you can actually benefit from cost segregation before you spend the money on a project.
On that note, we recently created a video that explains how cost segregation runs through a tax return. Many of our clients have given us rave reviews for the video's simplicity and ability to explain cost segregation in a tax return. It's really the foundation of how cost segregation works. Watch the video by clicking the below red button: