We’re not saying we enjoy upsetting the IRS.
But when we can legally write off walls, windows, flooring, parking lots… even toilets? Yeah, we’re gonna keep doing that.
This little-known tax move is called cost segregation, and it’s one of the most powerful (and underused) tools available to property owners.
If you own commercial property or a rental, and it cost more than $250,000, this strategy can help you:
- Take bigger tax deductions, way sooner
- Free up cash for upgrades or expansion
- Stop waiting 39 years to recover your investment
What Makes This Trick Work
Normally, when you buy a building, the IRS makes you depreciate it slooooowly. Like, over 27.5 or 39 years slowly.
But cost segregation breaks your building into smaller parts. Each with a shorter depreciation schedule.
Think five-year deductions for things like:
- Electrical systems
- Cabinetry
- Sidewalks
- HVAC
- Flooring
- Lighting
You get the benefit now. Not decades from now when you’re retired and yelling at squirrels in Florida.
Old Buildings Still Count
Here’s the part most business owners miss: You don’t need to have just bought the building.
You can go back and apply this to properties you’ve owned for years.
There’s an IRS form (Form 3115, if you’re feeling brave) that lets you catch up on all the missed depreciation, and take that deduction this year.
That’s not a someday savings. That’s real money back in your pocket now.
Yes, It’s Legit (But Don’t DIY It)
This is not a back-of-the-napkin kind of thing. You’ll need a formal, engineering-based study done by pros who know how to speak IRS fluently.
The study maps out every qualifying component in your building. We’re talking floors, lighting, HVAC systems, landscaping, even your parking lot striping.
Done properly, you’re audit-proof. Done wrong, and the IRS tosses the whole thing.
Is It Worth It for You?
If you’ve purchased, built or renovated any of the following, cost segregation is worth a closer look:
- Rental properties (residential or commercial)
- Medical or professional office buildings
- Warehouses or storage facilities
- Retail strip centers
- Mixed-use buildings
If you lease your space, or if you already have unused passive losses stacking up, this strategy might not help right now. But if you’ve got profits and own your building, it’s probably time to explore it.
Want to Know What This Could Save You?
Let’s talk.
We’ll review your situation, tell you if it makes sense, and show you how to do it the right way. If it’s not a fit, we’ll tell you that too.
