Michael HenningerCEO/Founder, Main Street CFO & Tax Advisors · Founder of Main Street CFO and Tax Advisors

Guest appearance on Real Estate Pros Podcast with Scott Bursey #paylesstaxes

4 Jun 2026 · 1 min

Watch on YouTube

0:54

In this podcast excerpt, the host asks about the most significant yet underused tax deduction for active real estate investors. The guest identifies the combination of cost segregation and bonus depreciation as that opportunity. They explain that standard depreciation for rental properties spans 27.5 years (residential) or 39 years (commercial). Cost segregation involves breaking a building into components that can be re‑classified into shorter recovery periods—typically 5‑ and 15‑year classes (occasionally 7‑year). By reallocating portions of the property’s cost into these shorter‑life buckets, the depreciation schedule is compressed. Bonus depreciation then allows the entire amount allocated to these short‑life assets to be deducted in the first year, effectively front‑loading what would otherwise be spread over decades. The guest emphasizes that many investors overlook this strategy, missing out on substantial early‑year tax savings.

Chapters

What is the biggest yet most underutilized tax deduction opportunity for the average active real estate investor currently?
I think, and then this is one that's kind of over and underutilized. This is the cost segregation combined with bonus depreciation. Basically what that does is it allows, normally if you have a rental property or whether it's residential, commercial, you either have to depreciate it over 27.5 years or 39 years, right? So you get 1/39th of that, 1/27.5th of that. Cost segregation says, look, in this building, there are pieces of it we're going to carve out and shove into these shorter life buckets. Usually 5 and 15, sometimes 7, but usually 5 and 15. That takes that 39 years, condenses it down to 15 or 5. In addition, bonus depreciation comes in and says, hey, if you have these assets that are in these 5, 7, 15-year buckets, we're going to take it all in one year. So you took those expenses and you maximize it from 39 and you shoved it into the first year.