Cost Segregation for Rental Properties

Of course, everyone’s tax situation and structure are a little different, in the simplest terms it boils down to whether this rental income has created a tax liability or not. If it has, then cost segregation can greatly reduce or eliminate that tax liability, freeing up more cash to invest in your current properties or to invest in more properties.

Cost Segregation Makes Rental Properties Worth Your Time & Money

The perception of the benefits of cost segregation on single family or like rental properties among many CPAs and property investors is it’s too expensive, or there may not be enough benefit to justify the cost. That’s where having expertise and options for prospective clients makes all the difference. Many of these opinions come from hearsay or perception, and not a knowledge of the facts or alternative solutions, or when it makes sense to evaluate this “interest free loan from the IRS”. And in many cases, the expense of a fully engineered study with an inspection on a single-family rental is too costly. Though there are cost effective alternatives that deliver these sought-after tax deductions.

Rental Properties that Qualify for Cost Seg

Multi-family homes

Getaway homes

Rental property vs other commercial properties

So how is cost segregation different for rental properties versus other commercial properties?

Essentially the fundamentals of cost segregation for single family, or 2 to 4-unit properties is no different than any other commercial property type. Having deep knowledge and analytics of the tax law and rules for each particular property type is essential in accurately identifying and maximizing tax benefits.

With this deep understanding, ELB Consulting has developed a modeling platform based on our nearly 20 years of experience and over 14,000 projects in our proprietary database of historical projects. This platform, DIYcostseg.com provides and accurate cost segregation study for single family-duplex-triplex-fourplex rental properties for under $500. The results are available in minutes, and complete audit protection and defense is provided in the unlikely event of an IRS audit.

There are circumstances when our fully engineered, more traditional study may be warranted based on the improvement plan and basis value of the property. This depends on the investors long term strategy.

So, while some on blog posts or other single-family rentals websites may tell you differently, your rental properties can certainly qualify for cost segregation benefits that will reduce tax liability. It really all boils down to circumstances and if it makes sense for your properties and tax situation.