30 Nov CREPN #120 – Accelerate Depreciation through Cost Segregation with Paul Caputo
Cost Segregation can turbo charge your commercial real estate investments financial results by accelerating the depreciation schedule. [x_audio_embed][/x_audio_embed] Paul Caputo with Segregation Holding LLC provides an explanation of how it works and what the benefit is to commercial real estate investors. Depreciation is an accounting tool that recognizes each year, a percentage of your building’s life expectancy is used up. This loss can be recognized for tax purposes as an expense against the income generated. When you purchase a building, regardless of the age of the building, the depreciation clock starts. The standard building depreciation schedule is 27.5 years for residential and 39 years for commercial. If you purchase a residential property, ie an apartment building, and the building is valued at $2,750,000 at acquisition, the straight line depreciation would be $100,000 each year. This amount will be deducted from your income to determine the taxable income. A cost segregation study breaks the building into its component parts. Depending on the estimated life expectancy of each building part determines the ability to accelerate the depreciation.