Q: Tax Advantages for Passive Investors: Depreciation & Cost Segregation
A: At Asset Capital, we don’t just focus on strong returns, we help our investors keep more of what they earn. One of the most powerful yet often overlooked benefits of investing in commercial and multifamily real estate is the ability to reduce or defer taxes through depreciation and cost segregation.
Q: How It Works: Creating “Paper Losses” to Offset Real Income
When you invest with us as a limited partner, you become a fractional owner of real estate. The IRS allows us to account for the natural wear and tear of the property, called depreciation, even though your investment may actually be increasing in value.
This results in passive paper losses that can be used to offset your share of the income the property generates. In many cases, this means you’re receiving tax-advantaged or even tax-deferred cash flow.
Q: Accelerated Depreciation Through Cost Segregation
To maximize your tax savings, we perform cost segregation studies on our properties. This engineering-based analysis allows us to separate certain components of the building (e.g., appliances, flooring, plumbing) and depreciate them over 5, 7, or 15 years rather than the standard 27.5 or 39 years.
The result: greater upfront losses passed through to you as a passive investor, helping reduce your taxable income from real estate or other passive sources.
Q: Bonus Depreciation: Supercharged Tax Benefits
With recent tax laws allowing for bonus depreciation, we can deduct a significant portion of the property’s eligible assets in the first year. This means our investors often receive large depreciation write-offs in year one dramatically enhancing cash-on-cash returns when viewed after tax.
Q: The Bottom Line
You invest passively, we help you optimize returns and reduce taxes. Whether you’re a high-income earner looking for smart diversification, or a seasoned investor seeking more tax-efficient income, our strategies are designed with your long-term financial growth in mind.
Want to see how this works on a real deal? Speak with our team about upcoming opportunities.