People who own real property will know that the value of the property depreciates over time. This ultimately results in tax benefits to the owner of the property because the value of the property is being reduced. However, most people who own real property don’t worry too much about depreciation because it takes a long time (more than two decades) for a lot of the depreciation stuff to kick in.

What you should know if you do own real property is that it may not take as long as you think for that depreciation to start. It is true that it takes decades for true depreciation of the building that you have on a property to be valuable to you on your taxes. However did you know that there are fixed assets within any building that actually start to depreciate much more quickly than the building itself? And that this means you can start reducing your taxable income and improving your cash flow much earlier on than you might have thought?

There is actually an entire business that has been created around identifying these parts of the building that depreciate sooner than the building itself. It is called cost segmentation. Professionals use cost seg engineering to reclassify the fixed assets that are starting to depreciate in order to use that information on taxes in a way that benefits the property owner.

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