Unlocking Greater Value with the Return of 100% Bonus Depreciation
In the world of commercial real estate, opportunities for brokers and their clients don’t end at the closing table. One of the most powerful, yet often overlooked, tools for maximizing property value and client satisfaction is cost segregation.
Cost segregation is a tax strategy that allows property owners to accelerate depreciation on certain components of their building, leading to substantial tax savings. For commercial real estate brokers, understanding and leveraging this strategy can be a game-changer, both for client relationships and for their own business development.
What Is Cost Segregation?
When a commercial building is purchased, constructed, or renovated, the IRS typically requires the asset to be depreciated over 39 years. Cost segregation breaks that down, identifying and reclassifying eligible assets such as flooring, lighting, cabinetry, and specialty plumbing to shorter depreciation schedules of 5, 7, or 15 years.
The result? A significant acceleration of deductions, putting more money back in the owner’s hands in the early years of ownership.
Why Commercial Real Estate Brokers Should Care
Commercial real estate brokers who understand cost segregation are in a strong position to offer added value to their clients. Here’s how:
- Differentiate your services: Going beyond traditional brokerage by offering insight into tax-saving strategies positions you as a trusted advisor.
- Close more deals: Clients who understand the post-purchase benefits of cost segregation may feel more confident about their investment, potentially increasing deal volume and client retention.
- Strengthen long-term relationships: Brokers who connect clients to cost segregation experts can stay involved beyond the transaction, becoming a go-to resource for future acquisitions.
The Return of 100% Bonus Depreciation: A Major Win for Cost Seg
One of the most exciting recent developments for property owners, and brokers alike, is the return of 100% bonus depreciation under the newly enacted One Big Beautiful Bill.
Under this provision, qualifying property components identified in a cost segregation study can now be fully expensed in the first year, rather than depreciated over 5, 7, or 15 years. This means an even larger upfront tax deduction, dramatically increasing the value of a cost segregation study.
How It Works:
Let’s say a client buys a $2 million commercial building. A cost segregation study reveals that $600,000 of the property qualifies for 5, 7, or 15-year treatment. With 100% bonus depreciation now back, that entire $600,000 can be fully deducted in Year 1, potentially reducing taxable income by a massive amount.
Why This Matters:
- Immediate cash flow: The tax savings can be reinvested into the property, used for capital improvements, or to expand a portfolio.
- Stronger ROI: Cost segregation becomes even more compelling, especially in the first year of ownership.
- Increased buyer interest: Savvy investors will view eligible properties more favorably due to the available tax strategies.
A Smart Move for Brokers and Clients
Cost segregation is more than a tax tool, it’s a strategic advantage. With the reinstatement of 100% bonus depreciation, there’s never been a better time for brokers to bring this conversation to the table.
Whether you’re representing buyers, developers, or owners, introducing them to cost segregation could save them hundreds of thousands of dollars, and cement your role as a high-value partner.
Final Thoughts
Tax strategies like cost segregation don’t just benefit property owners, they elevate the brokers who bring them forward. In a competitive real estate market, offering this insight can set you apart, create long-term loyalty, and help your clients make smarter, more profitable decisions.
If you want to learn more about how cost segregation studies can benefit your clients, or partner with a firm that can help, now is the time to act. Contact us at CSSI today!
