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Tax Smart Real Estate Investors Podcast
314. Depreciation 101: How to Use It the Right Way to Save Thousands in Taxes
Feb 25, 2025
Dive into the essential world of depreciation in real estate investing. Discover how to maximize tax savings through strategies like cost segregation and bonus depreciation. Learn about the potential pitfalls of depreciation recapture and how to strategically plan to minimize its impact. Explore the lazy 1031 exchange, a clever way to defer taxes without the hassle of full exchanges. This engaging discussion equips investors with valuable insights to optimize their tax positions and boost their cash flow.
27:55
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Quick takeaways
- Depreciation allows real estate investors to reduce taxable income by accounting for property value decline over time, crucial for cash flow management.
- Engaging in cost segregation studies enables investors to accelerate depreciation deductions, maximizing tax benefits by categorizing property components effectively.
Deep dives
Understanding Depreciation
Depreciation serves as a key tax-saving tool for real estate investors by allowing them to deduct the diminishing value of their properties over time. Essentially, it recognizes the natural deterioration of a capital asset, enabling investors to account for this reduction as a non-cash expense. Various types of properties have specific depreciation schedules, such as residential properties typically depreciating over 27.5 years and commercial properties over 39 years. Understanding these categories and their implications is crucial, as depreciation aids in reducing taxable income without depleting cash flow.
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