How Strategic Depreciation Boosted Cash Flow and Cut Taxes

At PRC Accounting & Tax Partner, we help real estate investors not only stay compliant but maximize returns. One of the most powerful — and often overlooked — tools in real estate tax strategy is cost segregation. Here’s how we helped a Raleigh-based real estate investor save over $40,000 in taxes through this advanced depreciation method.

The Client: A Growing Residential Property Investor in North Carolina

Our client had acquired multiple single-family rental properties over a 3-year span. Although their portfolio was growing steadily, so was their tax liability. They were using standard straight-line depreciation — unaware they were leaving significant money on the table.

The Problem: High Tax Bills, Low Short-Term Deductions

Despite owning over $1.5M in real estate, the client was only depreciating improvements over 27.5 years. That meant thousands of dollars in tax savings were being spread out over decades — instead of boosting cash flow today.

The Solution: Cost Segregation Study & Strategic Reclassification

We recommended a cost segregation study — a process that breaks down the property into different components (e.g., appliances, flooring, landscaping, electrical systems) and accelerates depreciation on items with shorter lifespans (5, 7, 15 years).

Steps We Took:

• Partnered with a licensed engineer for a certified cost segregation study

• Reclassified $280,000 worth of assets into 5-, 7-, and 15-year depreciation categories

• Applied bonus depreciation rules available under current tax law (IRC Section 168(k))

• Amended prior year returns to apply retroactive deductions

The Outcome: Over $40,000 in Immediate Tax Savings

By accelerating depreciation, we reduced their current-year tax liability by over $40K and improved overall cash flow by 17%. These savings allowed the client to:

• Acquire another investment property

• Reduce reliance on financing

• Increase returns for passive investors in their LLC

Client Feedback:
“I didn’t know cost segregation could make that big of a difference. This strategy changed how I approach every new deal now.” — PRC Client

What Is Cost Segregation and Who Can Benefit?

Cost segregation is a tax planning strategy that allows real estate owners to break down the purchase price of a property into individual assets, which can be depreciated faster. It’s ideal for:

• Residential landlords

• Commercial real estate investors

• Airbnb or vacation rental owners

• Developers and real estate syndicators

The Takeaway: Strategic Tax Planning Pays Off

Without proper planning, investors miss out on huge tax savings. At PRC Accounting & Tax Partner, we make sure you get the most out of every property purchase — not just during tax season, but throughout the year.

If you’re a real estate investor in Raleigh or anywhere in the U.S., don’t leave money on the table.

Schedule a Free Consultation Today

Let us show you how cost segregation and proactive bookkeeping can transform your bottom line.

Website: www.prcaccounting.com
Email: office@prcaccounting.com