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Real Estate Tax Benefits: What is Cost Segregation · Earn Your Leisure

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  Speaker 1: Earners.
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  Speaker 1: Can we just talk about real estate quickly? Because they
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  Speaker 1: know it's course segregation is a lot of different stuff
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  Speaker 1: like that. So I know that that's something that people
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  Speaker 1: might probably want to be inter us absolutely. So what
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  Speaker 1: I'm going to do here is I'm not sure if
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  Speaker 1: you guys caught my presentation. I know you guys were
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  Speaker 1: going you were going crazy during invest Fest, But I
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  Speaker 1: did a presentation during invest Pest, and I want to
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  Speaker 1: talk about I want to talk about real estate and
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  Speaker 1: cost segregation and what it means. And a lot of
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  Speaker 1: times people are like Listen, I need to make a change.
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  Speaker 1: I need to do something. I need to invest in
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  Speaker 1: real estate. But what happens is they may get between
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  Speaker 1: depreciation expenses and so between depreciation expenses and between the
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  Speaker 1: deductions of operating the real estate, they may just come
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  Speaker 1: off of it like being tax free. Right, So you
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  Speaker 1: may just like be tax free. You can get that
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  Speaker 1: really real estate income. But a lot of times people
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  Speaker 1: have business income, Right, you have business income that you're like, listen,
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  Speaker 1: I need to offset this business income, and I need
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  Speaker 1: an asset that's going to help me do that.
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  Speaker 2: So what exactly do I need to do? Right? So
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  Speaker 2: that's great.
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  Speaker 1: I was able to you know, utilize, and my say
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  Speaker 1: all the time real estate is one of those amazing,
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  Speaker 1: amazing tax.
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  Speaker 2: Deductions where you can win in real life and lose
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  Speaker 2: on paper.
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  Speaker 1: And all that means is that in real life you're
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  Speaker 1: bringing in money, but on paper because of depreciation, which
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  Speaker 1: we talked about when we're talking about vehicles, you're able
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  Speaker 1: to now lose on paper. Right, you're now most likely
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  Speaker 1: reporting a loss because you're.
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  Speaker 2: Able to take all those deductions.
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  Speaker 1: So basically, what we do to take it a step further, right,
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  Speaker 1: So all of my people that's like, listen, I need
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  Speaker 1: a higher depreciation expense. So therefore I'm now able to
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  Speaker 1: you know, go and deduct all of my you know,
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  Speaker 1: deduct my real estate losses and have it offset my
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  Speaker 1: business income.
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  Speaker 2: Right, So how can we do that? So we do
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  Speaker 2: what's called cost segregation.
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  Speaker 1: Cost surrogation is pretty much just to study, right, is
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  Speaker 1: a process that looks at each element of your property.
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  Speaker 1: It is It is not something that you can go
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  Speaker 1: off and do by yourself. It is an actual analysis
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  Speaker 1: that has to be done of your property. And then
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  Speaker 1: when it comes to the cost surrogation, what happens is
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  Speaker 1: you can also So we talked earlier about bonus depreciation. Right,
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  Speaker 1: so bonus appreciation pretty much up until twenty twenty two,
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  Speaker 1: it was one hundred percent, but then up until I
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  Speaker 1: mean now it's only sixty percent. But what happens is
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  Speaker 1: the IRS says, Okay, every single asset has its specific
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  Speaker 1: asset class, right, like it says, hey, this is a
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  Speaker 1: building can be written off over twenty seven and a
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  Speaker 1: half years. Personal property can be written off over five years.
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  Speaker 1: Land improvements can be written off over fifteen years. But
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  Speaker 1: how do we utilize bonus appreciation to like magnify or
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  Speaker 1: give us more of a depreciation expense. What we can
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  Speaker 1: do is, so in this example, we have a house
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  Speaker 1: that's five hundred thousand dollars. Keep in mind, guys, you
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  Speaker 1: cannot take bonus depreciation on a building, and you cannot
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  Speaker 1: depreciate land.
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  Speaker 2: Okay, So in.
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  Speaker 1: This example, you see that the home is five hundred
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  Speaker 1: thousand dollars, the building is two hundred and fifty thousand dollars.
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  Speaker 1: You're going to still divide that over twenty seven and
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  Speaker 1: a half years. You cannot take bonus appreciation on it.
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  Speaker 1: So the depreciation expense there's going to be nine thousand,
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  Speaker 1: three hundred and eighty two dollars.
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  Speaker 2: Then you have.
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  Speaker 1: Personal property eighty seven thousand. The depreciation you can take
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  Speaker 1: sixty percent on that, So that's going to be fifty
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  Speaker 1: two thousand, two hundred dollars depreciation expense that you'll be
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  Speaker 1: able to take off of the personal property of your
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  Speaker 1: of your of your home.
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  Speaker 2: Right.
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  Speaker 1: And people are like, oh my god, like all of
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  Speaker 1: the like, how can you break it up like this?
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  Speaker 1: But you break it up because your house is not
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  Speaker 1: just a building, right. Your house is made up of
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  Speaker 1: different things. So let's dissect the property and really maximize
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  Speaker 1: on this depreciation expense. Then you have land improvements. Land
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  Speaker 1: improvements so this is like your driveway. So that is
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  Speaker 1: twenty five thousand dollars depreciation expense. You can take sixty
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  Speaker 1: percent of its fifteen thousand. That's going to give you
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  Speaker 1: a total depreciation expense of seventy six thousand, five hundred
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  Speaker 1: and eighty two dollars.
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  Speaker 2: Right.
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  Speaker 1: So, now, if let's just say you did not do
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  Speaker 1: cost segregation, and you just said, okay, well I have
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  Speaker 1: my home of five thousand dollars and then I had
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  Speaker 1: land of one hundred and thirty thousand, I need to
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  Speaker 1: back that out. You have about a thirteen thirteen thousand, five.
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  Speaker 2: Hundred dollars expence depreciation expense.
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  Speaker 1: But when you do cost segregation, now you're able to
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  Speaker 1: have a depreciation expense of seventy six thousand dollars.
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  Speaker 2: Right.
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  Speaker 1: And so now what that does is, let's say for
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  Speaker 1: my you know, for my people that are let's say
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  Speaker 1: let's just say you're in real estate, and this is
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  Speaker 1: what you're you know, you're doing.
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  Speaker 2: You're doing real estate full time.
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  Speaker 1: And let's just say you're investing in another business that's
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  Speaker 1: more passive right, you don't. You don't really have to
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  Speaker 1: be that active in that business. And but you have
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  Speaker 1: this money that's coming in. You need something to offset
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  Speaker 1: that money. And so why not utilize cost segregation? Why
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  Speaker 1: not dig deeper and really understand, like, Okay, how can
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  Speaker 1: I really utilize the tax code and things, these things
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  Speaker 1: to my advantage. And so many people are entitled to
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  Speaker 1: these things, but they're not aware that they're available. So
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  Speaker 1: I love cost segregation. I love real estate. It just helps.
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  Speaker 2: I love depreciate anything depreciation is involved in.
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  Speaker 1: I love it.
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  Speaker 2: Like just starts wiping stuff out, So I love it.
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