Cost segregation has long been an effective tax strategy for property owners, offering significant savings by accelerating depreciation on specific components of their real estate. However, as tax laws evolve and new opportunities arise, there are some key developments and considerations for 2024. Whether you're new to cost segregation or looking to optimize your existing strategies, here are three important things you should know this year.

1. Increased Scrutiny from the IRS

While cost segregation remains a powerful tool for boosting cash flow, it's essential to approach it with care in 2024. The IRS has been placing increased scrutiny on cost segregation studies, particularly focusing on accuracy and compliance with guidelines. Real estate investors and business owners need to ensure that their studies are conducted by qualified professionals who understand the nuances of IRS requirements.

Working with a reputable firm that has experience in defending cost segregation studies during audits can save you from potential headaches down the road. A well-executed study can withstand even the most thorough IRS review, while poorly conducted studies could lead to penalties and additional taxes.

2. The Impact of Bonus Depreciation Changes

One of the most significant developments in recent years has been the introduction of bonus depreciation, allowing property owners to deduct a large percentage of qualified property in the year it is placed in service. However, the 100% bonus depreciation rule, enacted under the Tax cuts and Jobs Act, began phasing out in 2022. 

For 2024, bonus depreciation is set to decrease from 80% to 60%, with further reductions in the coming years. This change means that while cost segregation will still provide accelerated depreciation benefits, the immediate tax relief from bonus depreciation will be slightly reduced. It's crucial to work with tax professionals who can help you navigate this transition and make the most of the remaining opportunities.

3. Cost Segregation Isn't Just for New Properties

A common misconception about cost segregation is that it's only beneficial for newly acquired or constructed properties. In reality, this tax strategy can be applied retroactively to properties that have been owned for several years. By conducting a look-back study, property owners can "catch up" on missed depreciation deductions from prior years and apply them to their current tax filings.

This strategy is particularly valuable for owners of older properties who may not have taken advantage of cost segregation in the past. With proper guidance, these retroactive studies can uncover substantial tax savings, often leading to significant reductions in current-year tax liabilities.

Take Control of Your Tax Strategy in 2024

Cost segregation remains a vital tax strategy for property owners in 2024, but staying informed on the latest developments is key to maximizing your benefits. Increased IRS scrutiny, changes to bonus depreciation, and opportunities for retroactive savings make it more important than ever to work with experienced professionals who can guide you through the process.

At Acena Consulting, we specialize in delivering comprehensive cost segregation studies that are both accurate and compliant. If you're ready to acquire significant tax savings, contact us today to learn how we can help you achieve your financial goals.