Real Estate Accounting: Speed up building savings

It generally takes 39 years—nearly half a century—to completely depreciate the cost of a business building. By that time, you or your business may no longer be around to celebrate. But you may be able to pick up the pace.

Strategy: Consider a cost segregation study. This engineering-based analysis identifies building components that can be depreciated over shorter periods—typically 5, 7, or 15 years instead of 39 years.

Elements like specialized electrical systems, certain flooring, landscaping, and parking lots often qualify for accelerated depreciation. By reclassifying these components, you can significantly reduce your tax liability in the early years of ownership.

The OBBBA has made this strategy even more attractive by permanently restoring 100% bonus depreciation for qualified property placed in service after January 19, 2025.

This means that components identified through a cost segregation study can potentially be written off entirely in the first year, providing substantial tax savings for real estate investors and business property owners.