3 Reasons to NOT do a cost segregation + bonus depreciation #realestateinvesting

Lydia PatelJul 13, 20261m 11s64 viewsScore 88
Pricing & Profitability
intermediate
Tax Strategy
Profitability
Investors
Airbnb
Multiple Properties
M

Summary

AI-generated

Cost segregation and bonus depreciation are powerful tax strategies for real estate investors, but they come with significant risks if not managed correctly. This video outlines three critical reasons to hesitate: the risk of losses being locked behind passive activity limitations, the necessity of having high enough income to benefit, and the potential for high-tax depreciation recapture upon sale.

Key insights

  • Moving real estate property (27.5 or 39-year life) into personal property (5, 7, or 15-year life) via cost segregation results in depreciation recapture at ordinary income tax rates when the property is sold.

Mistakes to avoid

  • Performing a cost segregation on a property you plan to sell quickly without using a 1031 exchange; this triggers high ordinary income tax on the recaptured depreciation.

Tools & resources

  • IRS (Internal Revenue Service)website

    The governing body providing the rules for passive activity and material participation criteria.

Curated by Learn STR by GoStudioM · Summary & key insights generated by AI · Reviewed by editorial