WORK WITH A PROVIDER WHO UNDERSTANDS YOUR ASSET TYPE. You want someone who can identify the right components without being overly aggressive or conservative. CHECK YOUR PAST DEALS. If you didn’t do cost segregation in a prior year, you may still be able to apply it retroactively using Form 3115. Ask your CPA. You don’t have to master every detail of bonus depreciation to benefit from it. But you do need to take it seriously. The rule is permanent. That means you can build it into your planning, not just your filing. If you own investment property or you’re about to, this is one of the cleanest, most powerful tools you have to improve your after-tax cash flow. All you have to do is use it.
you cover renovation costs, delay a refinance, or reinvest in your next project without raising more equity. TIME YOUR RENOVATIONS INTENTIONALLY. If you’re upgrading a property, placing those improvements in service after Jan. 19 means you may qualify for bonus depreciation, if they meet the criteria.
question after closing: “Have you looked into cost segregation for this property?” That conversation can lead to tens or hundreds of thousands of dollars in tax savings. That kind of savings improves reserves, strengthens DSCR, and reduces risk, without changing the loan terms. This isn’t about offering tax advice. It’s about helping your borrower keep more capital in the deal. And they’ll remember who brought it up. A REAL EXAMPLE A real estate investor purchased a $2.5 million retail center earlier this year. With cost segregation, they identified $680,000 in short-life assets such as parking areas, signage, HVAC units, site lighting, and landscaping. Because the building was placed in service after the cutoff, and the contract was signed after that date, they were eligible for 100% bonus depreciation. That one move resulted in roughly $238,000 in tax savings, which are funds they reinvested in tenant improvements and operating reserves without taking on new debt or selling equity. That’s the kind of impact bonus depreciation can have when you plan for it. WHAT TO DO NEXT Here’s how to make sure you’re not leaving money on the table: RUN A BONUS DEPRECIATION ESTIMATE. Use a calculator to get a rough idea of what portion of your property might qualify.
COMMON MISTAKES TO AVOID
This rule is simple, but it’s easy to miss the benefits by waiting too long or assuming it doesn’t apply. SKIPPING COST SEGREGATION ON SMALLER DEALS. Even on $600,000–$1.2 million properties, the math often works. You could unlock $50,000–$150,000 in deductions with a study that costs far less than that. ASSUMING USED PROPERTY DOESN’T QUALIFY. It does. As long as you haven’t used the asset before, you can apply bonus depreciation on used acquisitions, including SFRs, small multifamily, and commercial condominiums. WAITING UNTIL TAX SEASON TO BRING IT UP. If you wait until March to tell your CPA about a deal, they may not have time to plan around it. You want to model this in advance or at least flag it early. MISSING BONUS-ELIGIBLE IMPROVEMENTS. Paving, site lighting, nonstructural buildouts—many common renovation expenses qualify. If you’re not
SEAN GRAHAM
Sean Graham is a real estate investor and registered CPA who began his real estate journey by investing in small multifamily properties before launching Maven Equities, a commercial real
estate syndication company. He expanded into self-storage
tracking them properly, you could be missing valuable deductions.
acquisitions and development while continuing to manage a portfolio of residential rental properties. He launched Maven Cost Segregation to help real estate investors accelerate depreciation and unlock significant tax savings with cost segregation studies.
A QUICK NOTE FOR LENDERS If you’re financing a deal, bonus depreciation affects your borrower’s cash flow, which means it affects your loan. You can add value just by asking one
TALK TO YOUR CPA NOW. Don’t wait until tax preparation. Give them a heads-up so they can factor this into your year-end strategy.
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