💡 Why Every CRE Deal Deserves a Cost Segregation Study
Turn your depreciation schedule into an investment advantage.
Cost segregation turns your building’s structure and finishes into cash flow. Instead of waiting 39 years for the IRS to let you recover your investment, cost segregation breaks the property into faster-depreciating parts—like flooring, lighting, and mechanical systems—over 5, 7, or 15 years.
You’re not changing how much the property earns—NOI stays the same. You’re simply accelerating when you get your money back from the IRS.
- 💰 Bigger write-offs up front
- 💸 Less taxable income
- 📈 Higher after-tax cash flow
🧾 Example: 11 East 78th Street
- Purchase Price: $10.995 M
- Depreciable Basis (after land): $9.35 M
- Eligible for Bonus Depreciation: ≈ $2.6 M (100%)
- Tax Savings (37% bracket): ≈ $970 K in Year 1
That’s nearly $1 million back in investor pockets instead of sent to the IRS—without changing NOI or cap rate.
💰 What It Means for Investors
- ✅ Immediate liquidity—more Year 1 cash to reinvest
- ✅ Higher returns—front-loaded deductions boost IRR
- ✅ Fully IRS-compliant (MACRS + Form 3115)
- ✅ Smarter marketing—shows real after-tax ROI
“If a cost segregation study is performed, accelerated depreciation in Year 1 could total ≈ $2.6 M (vs $240 K under standard 39-year straight-line), generating ≈ $970 K in tax savings for a 37 % taxpayer. These savings enhance first-year after-tax cash flow without altering NOI or cap rate metrics.”
Bottom line: Cost segregation isn’t an accounting move—it’s a value amplifier that turns IRS depreciation rules into a competitive edge for every CRE investor.
