Many property owners overpay in taxes because they believe cost segregation and bonus depreciation are only for big players, too complicated, or not worth it. The truth? These tax tools can deliver substantial benefits even for small and mid-sized investors — if you know how to use them.

Here are the most common myths — and the facts that can put money back in your pocket.

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Myth #1: “Cost segregation is only for large commercial buildings.”

Fact: Cost segregation applies to any income-producing property, including residential rentals, small offices, short-term rentals, and duplexes. While the savings increase with property size, buildings valued over about $300,000 often see enough benefit to justify a study. Even a modest apartment complex can produce six-figure deductions in year one when combined with bonus depreciation.

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Myth #2: “It’s too complex to bother with.”

Fact: A qualified cost segregation firm handles the heavy lifting — from engineering analysis to IRS-ready documentation. Your role is simple:

1. Own income-producing real estate
2. Get a study performed
3. Let your CPA apply the results to your tax return
   

With proper guidance, the process is straightforward and fully IRS-compliant.

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Myth #3: “It only works in the first year.”

Fact: You can perform a lookback study on properties you already own. Using IRS Form 3115, you can “catch up” on missed depreciation in the current year without amending prior returns — an immediate cash flow boost.

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Myth #4: “Bonus depreciation is phasing out, so it’s too late.”

Fact: Under the 2025 tax law changes, 100% bonus depreciation is restored and available indefinitely for qualifying assets placed in service after January 19, 2025. That means you can still deduct the full cost of eligible short-life assets — from fixtures to landscaping — in the year they’re placed in service.

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Myth #5: “I don’t own enough property to benefit.”

Fact: Even a single $500,000 rental could yield $100,000–$150,000 in first-year deductions with the right strategy. You don’t have to be a major developer to see real results.

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Bottom Line

Cost segregation and bonus depreciation accelerate your deductions, improve cash flow, and help you keep more of what you earn. Whether you’re buying your first rental or managing a large portfolio, these strategies can make a meaningful difference.

We help investors of all sizes schedule IRS-compliant studies, apply the right bonus depreciation rules, and maximize first-year deductions. Let’s uncover your hidden tax savings today.

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