Multifamily Podcast Network

On today’s episode, we spend time speaking with Yonah Weiss-Business Director for Madison Specs, a national cost segregation leader. Having served as an educator prior to joining Madison Specs, Yonah found his calling for teaching and serving others through educating and when he discovered real estate, he wanted to continue educating others and help them by educating them on tax saving strategies like cost segregation.

Yonah describes the basics of depreciation and cost segregation by breaking down the concept of depreciation and how it relates to tax savings. Cost segregation is an added benefit for real estate investors as it allows you to accelerate the tax deductions you receive from owning investment real estate into a shorter time span therefore increasing the amount of tax savings in the earlier years of ownership. Yonah explains how cost segregation seperates non-structural components of a property that has a value and puts in on a different depreciation schedule. In order to conduct a cost segregation study, however, you must have an engineer who’s well versded in tax code and the building components to perform a detail assessment of your property.

Cost segregation, although a poweful tax saving strategy, may not apply to all circumstances. For example, if you invested in a property using an IRA or other retirement accounts that are already tax deferred accounts, then you would not be able to benefit from the additional tax savings of a cost segregation study. Another example in which an investor may not benefit would be an investor with no passive income to offset. 

A cost segregation analysis is free and allows you to discover the potential tax benefits prior to acquiring a property. If you acquire the property and decide that a cost segregation study will be beneficial, then an engineer is sent to your property and in turn you will receive a 90-100 page report explaining the tax depreciation benefits. 

Cody and Yonah discuss the different items that are eligible for an accelerated depreciation schedule and examples of what those new schedules look like. They then discuss bonus depreciation, which allows you to assume much of the accelerated depreciation in year one of ownership which equates to massive tax savings in year one. 

Whether you are a GP or LP, all parties with ownership in the property benefit from the tax savings from a cost segregation study and bonus depreciation (if qualified). One thing to be aware of however, at resale of the property you will have to pay a depreciation recapture tax, which is a tax on the amount of depreciation taken. There are ways to reduce that tax, as Yonah describes.

Engaging your cost segregation company in the due diligence phase can be beneficial for an investor. You can determine which depreciable items will benefit more from depreciation when performing renovations and you can also inform your potential investors of their projected tax savings if they decided to invest with you on a particular deal. 

Yonah is passionate about tax savings, educating others, and real estate investing. His primary inspiration for his success is his family and his best advice to others is always remain humble, always ask for help, and keep learning from others.

You can connect with Yonah on LinkedIn @Yonah Weiss, via email at [email protected], or visit his website at www.yonahweiss.com Also be on the lookout for Yonah’s new podcast series: Weiss Advice. 

 Thanks for tuning in! Until next time..

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