Why Cost Segregation Is Powerful in a Down Market
When the real estate market slows whether due to high interest rates, tighter lending conditions, or reduced buyer activity property owners need to be more strategic than ever. While selling, refinancing, or expanding may not be ideal in today’s market, cost segregation offers a timely and often-overlooked solution to improve cash flow and reduce tax liability without giving up ownership.
Take Advantage of Accelerated Depreciation
A cost segregation study reclassifies building components into shorter-lived asset categories such as 5, 7, or 15-year property instead of the traditional 27.5 or 39 years. This enables accelerated depreciation which translates to larger tax deductions much sooner. Even with bonus depreciation phasing out (down to 60% in 2025) a cost segregation study can unlock major savings especially critical when margins are tight.
Offset Losses with Long-Term Tax Savings
If you’re experiencing reduced rental income or delayed development you can use these accelerated deductions to offset current income or even create a net operating loss (NOL). While the CARES Act allowed NOL carrybacks for a short time during the COVID-19 period, under current law you can carry losses forward indefinitely using them to reduce future taxable income. That kind of long-term flexibility is a powerful financial cushion.
It’s Not Too Late: Use Form 3115 for Retroactive Savings
This strategy works across a wide range of property types multifamily, office, retail, industrial, hospitality, and even medical or mixed-use buildings. Many owners assume they missed their chance if the property was acquired years ago but the IRS allows a lookback using Form 3115 so you can retroactively claim missed depreciation without amending past returns.
Real Clients, Real Results
One recent case involved a commercial investor who had held a mixed-use property since 2020. After a refinance deal fell through due to higher rates and a tighter lending environment they turned to cost segregation to free up capital. We identified over $500,000 in short-life assets resulting in a first-year tax deduction of over $300,000 using 60% bonus depreciation. That deduction freed up liquidity and helped them stabilize operations in a tough financial environment.
Get Started with a Free Feasibility Analysis
The truth is you don’t need a booming market to benefit from cost segregation. In fact a slower market is the perfect time to optimize your tax strategy. You’re already holding the asset why not let it work harder for you by unlocking the depreciation you’re legally entitled to?
At Cost Segregation Consultants we specialize in identifying overlooked tax opportunities for real estate investors and business owners. We’ll conduct a free feasibility analysis to determine whether your property qualifies and how much you can save. If you’ve purchased, constructed, or renovated property in the last 15 years you likely have untapped deductions waiting to be claimed.
Ready to strengthen your tax strategy and boost your liquidity? Visit https://costsegconsultants.com or contact our team to get started today.
