Cost segregation is a legal tax strategy that allows real estate owners to accelerate depreciation by identifying parts of a building—such as flooring, lighting, wiring, plumbing, appliances, and site improvements—that can be depreciated much faster than the building itself.
Instead of writing off the entire property over 27.5 or 39 years, these components can often be depreciated over 5, 7, or 15 years, creating significantly larger tax deductions in the early years of ownership. This increases cash flow, reduces current tax liability, and allows investors to reinvest more capital sooner, while remaining fully compliant with IRS guidelines.