Cost Segregation: Unlocking Hidden Tax Savings in Real Estate

For real estate owners and investors, 2022 continues to be a prime year to take advantage of Cost Segregation Studies. This tax strategy allows you to break down a property into its individual components and reclassify certain assets — such as flooring, lighting, cabinetry, electrical, plumbing, and even land improvements like parking lots and landscaping — into shorter depreciation schedules.

Instead of waiting 27.5 or 39 years to recover the cost of a building, cost segregation enables portions of your investment to be depreciated over 5, 7, or 15 years. With 100% bonus depreciation still available in 2022, property owners could write off eligible improvements immediately, creating substantial tax savings and improved cash flow.

This additional liquidity can then be reinvested — whether to expand operations, renovate properties, or acquire new assets. Even properties purchased or renovated in prior years may qualify through a “look-back” study, allowing taxpayers to catch up on missed depreciation without amending past returns.

If you purchased, built, or renovated property in recent years, a cost segregation study in 2022 could significantly accelerate your deductions and reduce your tax burden.