Unlock major tax savings in 2025 with cost segregation and 100% bonus depreciation for real estate investments.
With the holiday season upon us, real estate investors have more than just festivities to celebrate. There’s a historic opportunity for cost segregation and tax savings.
Thanks to the One Big Beautiful Bill Act (OBBBA), depreciation rules have been permanently rewritten, opening the door to accelerated deductions and stronger cash flow.
Why cost segregation matters now
To enhance your investment returns, you need a strategic approach: a “battle plan.”
Like having to fortify your home against bumbling burglars in that holiday cinematic classic, breaking down your property into its unique components can unlock substantial, front-loaded tax benefits. With OBBBA restoring 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025, the time to act is now.
Instead of waiting decades to recover costs, a cost segregation study lets you identify 5-, 7-, and 15-year assets and write them off entirely in year one. Think of it as front-loading your tax savings, the ultimate battle trick.
What is cost segregation?
Cost segregation is a strategic tax planning tool that helps defer federal and potentially state income taxes while increasing cash flow.
By accelerating depreciation deductions on qualifying building components, you can reclassify costs that would typically be depreciated over 39 years (non-residential) or 27.5 years (residential rental) into shorter asset life categories. This means you can claim larger deductions sooner, potentially boosting your bottom line.
The “battle plan” components: 5-year personal property
Setting traps for those hypothetical burglars — like security systems, specialty lighting, and high-end appliances— mirror 5-year Section 1245 personal property. These items, identified in a cost segregation study, can be reclassified and immediately expensed thanks to:
- 5-year recovery lives
- Permanent 100% bonus depreciation
- Expansion of Section 179 limits — The deduction cap rose to $2.5 million, with a $4 million investment ceiling — allowing immediate expensing of certain improvements that previously might not have qualified.
The “treehouse” escape: 15-year land improvements
No need to jump out the window to your treehouse for safety: land improvements are your escape route. Permanent site improvements such as fencing, specialized landscaping, parking lots, and decks are classified as 15-year land improvements under Section 1250 and qualify for 100% bonus depreciation.
Keep the change, ya filthy animal!
A cost segregation study can transform your tax return into a powerful cash flow tool. For example, on a $5 million acquisition, you might uncover over $1 million in reclassified assets, generating $370,000 in first-year tax savings (assuming a top tax rate of 37%).
2025 is the year to take control of your tax strategy. With a well-crafted battle plan, you can enhance your portfolio’s potential and safeguard your investments for the future.
How CLA can help with cost segregation
Ready to defend your portfolio? CLA helps real estate owners and investors turn tax strategies into actual results. Our team conducts cost segregation studies to identify opportunities for accelerated depreciation and improved cash flow.
We provide clear, actionable insights, modeling the impact on your bottom line and guiding you through implementation. From analyzing property components to coordinating with tax advisors, we make the process efficient and transparent so you can focus on growing your portfolio.