Tag Archives: real estate

4 Cost Segregation Considerations For Residential Investors

18 Jan

Real estate is one of the best tax strategies out there, but many landlords, don’t, know how to maximize their deductions and minimize their taxes. Let’s look at four things you need to know on how you can use cost segregation studies to boost your deductions.

1. Cost Segregation Defined

A cost segregation study is the practice of allocating the cost basis of property to various components of your rental real estate, so instead of allocating 100 % of the value to building and land a cost segregation study allows us to segregate, or divide the cost basis between personal property, land improvements, building and land.

That means that when we’re done with a cost segregation study, we’re gonna have value allocated to five year, seven year, fifteen year and twenty seven and a half year property, rather than allocating all of our value only to twenty seven and a half-year property. The results of this allocation mean that we will be able to depreciate components over a faster time period. Depreciating parts of the building faster generates large, non-cash, expenses and reduces taxes.

2. Bonus Depreciation

The second tip is that we can use 100 % bonus depreciation for any component with a useful life of less than twenty years. That cost segregation study that we went through allowed us to allocate value to components with a useful life of five, seven fifteen and twenty seven and a half years.

The nice thing about bonus depreciation is that the value that we allocated to the five seven and fifteen year property can be 100 % expensed in the first year. Assuming that we do the cost segregation study in the first year of ownership, this bonus depreciation will result in writing off about 20 to 30 percent of the purchase price of your real estate in the first year. Even if it is not done in the first year of ownership, as long as the property was purchased after September of 2017, we can go back and get the benefit for past years without amending tax returns. This can result in large passive losses that you may be able to claim on your personal tax returns.

3. Passive Vs Active Losses

The third tip is that the amount of passive losses that you can take on your personal tax returns depends on several things:

If You Qualify As an Active Real Estate Professional

If you qualify as an active real estate professional, your losses are not considered passive, and may be used to offset your total income. To qualify as an active Real Estate Professional, you must:

  • provide more than one-half of his or her total personal services in real property trades or businesses in which he or she materially participates
  • perform more than 750 hours of services during the tax year in real property trades or businesses, with contemporaneous time logs that detail the services rendered.
  • materially participate in each rental property, unless the you make an election to treat all interests in rental real estate as a single rental real estate activity.

These rules are far more complicated than we can address here. Be very careful in determining your status as a real estate professional, and consult with your tax professional or someone well-versed in the qualification process.

If You Don’t Qualify as an Active Real Estate Professional

If you don’t qualify as an active real estate professional, your loss is considered passive. Under the passive activity rules you can deduct up to $25,000 in passive losses against your ordinary income (W-2 wages) if your modified adjusted gross income (MAGI) is $100,000 or less. This deduction phases out $1 for every $2 of MAGI above $100,000 until $150,000 when it is completely phased out. If you cannot utilize the passive losses due to the passive loss restrictions, you can carry the loss forward and utilized in future years.

4. You Don’t Have to Wonder If This Is Right For You

You can find out quickly and easily if a cost segregation study would benefit you and your properties specifically. Click here to get a FREE preliminary analysis of your property or properties. Please put my name, David Wiener, in the “How Did Yo Hear About Us” box. This FREE analysis will show you what an engineering-based (best method) cost segregation study, done by the premier provider in the United States, would cost and the estimated tax benefit you would realize. I’ll be happy to review the analysis with you, as well as answer your questions about the Real Estate Professional designation and your situation.

Contact Me Directly

Please subscribe to this blog , or contact me with any questions.

Call me directly at 770-224-8504 or 888-780-1333
Schedule a phone call with me by clicking here
Visit my website by clicking here
Visit my YouTube channel by clicking here
Email me at David.wiener@cashflowstrategies.us

Free CARES Act Webinar for Commercial Real Estate Owners

9 Apr

Tuesday, April 14, 2020 1:00 PM CST

If you own or lease commercial or residential income property, this will likely be the most critical information you have heard since the Covid-19 outbreak.

During this uncertain time, most business owners are faced with difficult decisions regarding cash flow. We can help you increase cash flow NOW, through new and existing tax legislation, because you own commercial property.

Please don’t miss this critical tax information.

Join us for a live 30-minute webinar on Tuesday, April 14th at 1:00pm CST. We will be discussing how, as a business owner, you are able to make cash available immediately by utilizing existing tax laws and the new CARES Act. We will be explaining two specific items, NOLs and Qualified Improvement Property, within the act that have been designed to allow you to get money back from the US Treasury when you need it most. These topics are not related to the SBA loan process; this is an additional viable source of cash flow.

Please click the link below to register for this live webinar with Q&A so that you can have all your questions answered in one place. Seating is limited, so please register soon. 

Whether you are a tax professional joining the session on your client’s behalf, a building owner, or lessee looking for a solution to a very real problem, we are here to answer any questions you have.

CLICK NOW TO REGISTER

CSSI has been called on during economic downturns in the past, saving businesses in the path of financial destruction. 

“Thank you so much CSSI! Without the influx of cash I received from my reduced tax payment, I would have had to close my new location. You literally saved my business. I will forever be grateful.“

                                                                                                      – Barbara S.

About CSSI: For years, CSSI has been providing quality and affordable engineering-based cost segregation studies. Our national coverage and expertise allow us to work with customers and properties across the United States.

With over 20,000 studies performed, we are the premier company proving cost segregation studies and Tangible Property Regulation studies for U.S. Properties.

This webinar will be presented by Warren Dazzio, Executive Vice President, and Robert Taylor, VP of Operations at CSSI.

Are You A Landlord? Don’t overpay your taxes.

14 Jul

Many landlords, especially those who own smaller properties, are unaware of the tax benefits available to them.  Here is something that your CPA may never tell you about.

Real estate investors have a simple alternative.  Most will take the option of depreciating the initial value of their residential rental building in equal amounts over the allowable 27.5 years or their office building over 39 years.  In a $200,000 rented house, you would write off $7.272 per year in depreciation.  Many CPAs will recommend that you do your depreciation this way, the easiest way.


Straight line depreciation may be the easiest way for your CPA to apply your depreciation, but is it the most advantageous way for you and your cash flow?  Depending on your circumstance? Perhaps not.


Cost segregation is an IRS-defined method of accelerating your depreciation and, while it may be more complicated, it need not be difficult for you or your tax professional.  By using engineering-based cost segregation, your property depreciation is applied by depreciating all of its component parts, many of which may be depreciated fully in 5, 7 or 15 year increments.  By depreciating this “short life” property more quickly, you would receive an increased tax deduction now rather than waiting for 27.5 or 30 years to take its value off of your tax bill.  With the 2017 Tax Cuts and Jobs Act, that 5, 7 and 15 year property can all be depreciated the very first year.  That is called “Bonus Depreciation”

In essence, you are getting an interest free loan on your taxes from the US Government.  Think of it this way:  If I was going to give you $100,000, would you rather have it all now, or in 27.5 annual installments.  Getting it right away is a “no-brainer” because that money, if invested back into the business or smart investments, will yield far more money long-term than having me babysit your money for you for many years.

If you:

  • have property worth over $200,000,
  • intend to keep the property over 3 years, and
  • pay taxes

then I believe it would be in your best financial interest to, at least, investigate whether this is a good option for you.   I will complete a no-cost, no-obligation analysis of your property and I will let you know if this strategy would be profitable for you.  Your tax professional cannot, in most cases, provide you with the study necessary to maximize your depreciation.  We will work with your CPA to make sure you get all the cash flow you are entitled to.

I can also advise you of some other tax strategies that may be beneficial to your cash flow and profitability.  The 2014 IRS Repair Regulations, IRS Safe Harbors, and Building Systems Valuations may all be beneficial strategies to consider.  I’ll help you navigate these strategies.

And don’t worry about the IRS.  They have called this method of cost segregation the “certain method” of depreciation.  We have completed over 20,000 studies in all 50 states, and have never triggered an audit.  Should the IRS question your cost segregation during an audit, we will defend the study at no cost to you.  We have never had a study rejected or changed.

Go to my web site at https://davidwiener.cssistudy.com for more information, or schedule a time to talk with me at https://calendly.com/david-wiener/talk.

%d bloggers like this: