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  • Writer's pictureThe Lincoln Accounting Team

Use cost segregation to save thousands

Hi again,

Ever heard of "Cost Segregation"?

No. It's not a new Netflix thriller.

In fact, it's the secret strategy of wealthy real estate investors to minimize their tax bill.

Yes, you heard right, LEGALLY minimizing tax.

Sounds exciting? Stick around.

First things first, let's clear up a misconception.

Cost Segregation is NOT a tool for tax avoidance exclusive to the filthy rich.

It's available to ANY property owner who knows how to wield it.

So, what is it exactly?

Cost segregation is a tax-deferring strategy that allows you to accelerate the depreciation of your property on paper.

How does it work?

Let's say you own a building worth $800,000.

The IRS allows you to depreciate the building over 27.5 years. That's a yearly write-off of $29,090 from your taxable income.

But with cost segregation, you can depreciate components of your building (like fences, flooring, and appliances) quicker. Instead of 27.5 years, you depreciate them over 5, 7, or 15 years.

That's a real game-changer.

Take a 4-unit apartment valued at $1,000,000.

Without cost segregation, you can write off $29,090 per year.

But, with cost segregation, you can write off $60,000 annually for the next 5 years from your taxable income.

An extra $30,910 in your pocket each year!

But, the cherry on the cake?

The Tax Cuts and Jobs Act of 2017 lets you take 100% of that accelerated depreciation expense in year one.

So, if you can depreciate 30% of your property in 5 years (that's $300,000), you can take the whole $300,000 tax write-off in the FIRST year.

That's a significant boost to your cash flow.

But remember, it's not all sunshine and rainbows.

There's a cost to hire a firm to do a cost segregation study. And, there's a depreciation recapture to pay when you sell your property.

But, with careful planning, the benefits can far outweigh the costs.

So, ready to make your money work smarter, not harder?

Let's chat more about how cost segregation can help you grow your wealth.

Let's talk,


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