{"id":25682,"date":"2024-11-13T13:16:37","date_gmt":"2024-11-13T13:16:37","guid":{"rendered":"https:\/\/leyton.com\/us\/?post_type=white_paper&p=25682"},"modified":"2025-01-22T17:00:32","modified_gmt":"2025-01-22T17:00:32","slug":"rental-property-cost-segregation","status":"publish","type":"white_paper","link":"https:\/\/leyton.com\/us\/insights\/white-papers\/rental-property-cost-segregation\/","title":{"rendered":"Cost Segregation – Rental Property or Apartment Building Study\u00a0"},"content":{"rendered":"
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Maximize Your Rental Property<\/mark><\/strong> Tax Strategy <\/h2>\n \n \n

What is Cost Segregation<\/mark><\/strong>
Cost segregation<\/mark><\/a> <\/strong>is an effective tax planning strategy that helps businesses and individuals involved in constructing, purchasing, expanding, or renovating real estate<\/strong> reduce their tax liabilities by accelerating depreciation deductions, which allows for the deferral of both federal and state income taxes.

Rental Property<\/mark><\/strong>
Unlike commercial properties, which depreciate over 39 years, residential properties such as apartment buildings qualify for a shorter depreciation period of 27 \u00bd years. <\/strong>This important distinction enables property owners to optimize their tax strategy, enhancing both cash flow and overall investment returns, while improving the financial viability of their real estate projects.\u00a0
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Practical Example <\/strong><\/h2>\n <\/div>\n
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The following case study<\/strong> highlights the benefits of accelerated depreciation, demonstrating how similar advantages can be realized for apartments with complex infrastructure and renter-focused amenities, ultimately optimizing the apartment building depreciation life for tax efficiency.<\/p>\n <\/div>\n <\/div>\n

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Building information <\/mark><\/h3>\n

\u25cb <\/strong><\/mark>Building Type<\/strong> \ud83e\udc6a <\/mark>Apartment
\u25cb <\/strong><\/mark>Property Type:<\/strong> \ud83e\udc6a <\/mark> Residential
\u25cb <\/strong><\/mark>Building Size:<\/strong> \ud83e\udc6a <\/mark> 35,000 SF
\u25cb<\/strong><\/mark> Study Scope:<\/em><\/strong> \ud83e\udc6a <\/mark>New Build
\u25cb<\/strong><\/mark> Condition<\/strong>: \ud83e\udc6a <\/mark>New
\u25cb<\/strong><\/mark> Filling Year:<\/strong> \ud83e\udc6a <\/mark> 2023
\u25cb<\/strong><\/mark> Date Placed in Service:<\/strong> \ud83e\udc6a <\/mark> 2020
\u25cb<\/strong><\/mark> Purchase Price less Land or Total Construction Cost:<\/strong> \ud83e\udc6a <\/mark> $7,400,000
\u25cb<\/strong><\/mark> Tax Rate:<\/strong> \ud83e\udc6a <\/mark> 30%
\u25cb<\/strong><\/mark> Return on Investment Factor:<\/strong> \ud83e\udc6a <\/mark> 8%<\/p>\n <\/div>\n

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Summary of Benefits<\/mark><\/h3>\n

\u25cb<\/mark> 25% Additional Tax Deductions in First Year:<\/strong> \ud83e\udc6a <\/mark>$ 1,122,445.74

\u25cb<\/mark> RNPV Over Remaining Life of Property<\/strong>: \ud83e\udc6a <\/mark>$ 225,280.26

\u25cb<\/strong><\/mark> <\/em>Net Present Value (NPV) Over 10 Years:<\/strong> \ud83e\udc6a <\/mark>$ 284,592.38

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Building Allocation After Study <\/span>\n <\/h2>\n <\/div>\n