Can You Do Cost Segregation on Residential Rental Property?

If you’re a real estate investor or property owner, you’ve probably heard about cost segregation and how it can help you maximize tax benefits. But can you do cost segregation on residential rental property?

The answer is “yes.”

Below, we explore how cost segregation works for residential rental property and how KBKG’s Residential Cost Segregator® can be your solution to unlocking tax savings.

What Is Cost Segregation?

Cost segregation is a tax strategy that real estate investors and property owners use to speed up depreciation deductions on their properties.

Typically, when you purchase a residential rental property, you depreciate its value over 27.5 years for tax purposes. However, with cost segregation, you identify and allocate specific property components to shorter depreciation periods, such as five, seven, or fifteen years, for significant up-front tax deductions and lower tax liabilities.

Cost Segregation for Residential Rental Property

Let’s delve into a cost segregation study for residential rental property.

Many people associate cost segregation with commercial properties, but it’s equally beneficial for residential real estate. Whether you own single-family homes, multi-family units, or apartment complexes, cost segregation boosts tax savings.

Residential cost segregation involves identifying various property components that you can reclassify for accelerated depreciation. Examples of these components include:

  • Cabinets and Millwork: You can reclassify built-in cabinets for shorter depreciation periods.
  • Furnishings: Upgrading window treatments and appliances can provide immediate tax benefits through accelerated depreciation.
  • Carpeting: You can consider quality carpeting separate from the building structure for tax purposes.

You can pinpoint these components and more by conducting a cost segregation study on your residential rental property.

The Benefits of Cost Segregation for Real Estate

Real estate cost segregation isn’t just a tax-saving strategy. It’s a beneficial investment in your real estate portfolio’s financial health, offering:

  • Immediate Tax Savings: Accelerated depreciation reduces your tax liability.
  • Increased Cash Flow: Lower taxes mean more cash flow for property improvements, expansion, or other investments.
  • Enhanced ROI: Maximizing tax benefits can increase the ROI for residential rental properties.

KBKG's Solutions and Resources for Residential Cost Segregation

At KBKG, we specialize in cost segregation for residential real estate. Our team of experts understands the intricacies of tax laws and regulations, and we have the tools and experience to conduct a thorough cost segregation study for real estate tailored to your property.

But that’s not all. We go beyond just providing services. We offer a wealth of educational resources to help you better understand how cost segregation for residential rental properties works. Our webinars, insights, and articles provide valuable knowledge that empowers you to make informed decisions about your real estate investments.

Our Residential Cost Segregator® simplifies the process, making estimating the potential tax savings for your residential rental property easy. With KBKG by your side, you can confidently navigate the complex world of cost segregation analysis for real estate.

Get Your Cost Segregation for Residential Real Estate Report Today

Cost segregation offers numerous financial benefits and can significantly reduce your tax liability. If you’re looking to maximize your tax savings and improve your cash flow with the best in the business, trust KBKG’s expertise and residential cost segregator tools to guide you through the process. For more information, contact us today.