Real Estate Depreciation: The Most Underused Tax Strategy

Real estate's most powerful return driver is often invisible: depreciation. The IRS lets you depreciate residential structures over 27.5 years, creating a non-cash expense that shelters real cash flow from tax.

Cost segregation studies accelerate depreciation by reclassifying portions of the property into 5-, 7-, and 15-year asset categories. Combined with bonus depreciation, this can produce a paper loss in year one that exceeds the property's cash flow.

This is not tax advice. Work with a real-estate-focused CPA before applying these strategies — but understand that ignoring them leaves significant return on the table.