Tax Planning Is A Year-Round Strategy: Don't Wait!

    If you qualify as a Real Estate Professional or an Active Participant, you have a great tax hedge with Bonus Depreciation on your cost segregation study.

    Too many investors and CPAs wait until Q4 (the last minute), or even Q1 (too late) to tax plan for 2023. If you are an active investor and/or a business person, invest your time and money to meet and strategize with your CPA a few times a year. The return should be well worth it. 

     Cost segregation is an important tax strategy tool that should not be relegated to a year-end decision for several reasons:

• A cost segregation study for a January or February acquisition can be used to offset your June 15 and/or September 15 estimated tax payments. No need to wait for the benefit until you file next year.

• You should know your tax liability impact on a quarterly basis. Then you will know what potential acquisitions and/or dispositions make the most sense.

• The 100% Bonus Depreciation expired on 12/31/2022. We have many clients loading up on acquisitions to build a carry-forward reserve of deductions. If you purchased a property from September 28th, 2017 through December 31st, 2022 then you qualify for 100% Bonus Depreciation. Bonus Depreciation for 2023 is currently at 80%.

• If your property has multiple investors and you wait until late Q4 to do a cost segregation study, this can delay your K1s. Encourage the investors to commit once the acquisition is complete. Avoid the year-end “mad rush” to get results.

     Whether evaluating the impact of a cost segregation on a $50M property, or a $500K short term rental, the concept is the same. Get it done early. Be prepared.

     Know where you stand and what you owe Uncle Sam... If you don't, you are likely losing money! Reducing tax liability will increase your cash flow and your ability to invest in more properties.