.

 

Let’s talk about something that’s not quite as fun as sipping wine at sunset but could save you a lot more money — cost segregation.

If you own investment property anywhere on the Central Coast, understanding this strategy could put thousands back in your pocket — without raising rents or working longer hours.

 

When you buy or own a rental or commercial property, the IRS lets you depreciate it slowly over decades — 27.5 years for residential, 39 for commercial.

 

Cost segregation speeds things up. You identify the pieces of your property that wear out sooner — like flooring, lighting, or landscaping — and give those items shorter depreciation lives (5, 7, or 15 years).

That means:
✅ Bigger write-offs early
✅ Lower taxable income now
✅ More cash flow today

Think of it as rearranging the puzzle pieces of your property so you get your money back faster.
(source: Gavtax.com)

 

Property values and costs here aren’t small potatoes — so maximizing tax strategy matters.

Cost segregation helps you:

 

Accelerate depreciation → reduce taxable income faster

Boost cash flow → use savings to reinvest, upgrade, or pay down debt

Grow your portfolio → leverage tax savings for the next purchase

Stay competitive → take advantage of a strategy big investors already use

 

Here’s what actually happens behind the scenes:

 

Identify components. Your property is broken into parts — personal property, land improvements, and structural elements.

Classify & re-allocate. Eligible items move to shorter depreciation timelines (5-, 7-, or 15-year categories).

Document everything. Blueprints, invoices, and cost data = your IRS backup.

Work with pros. Engineers + CPAs = maximum benefit + compliance.

Once done, you get a report detailing exactly which components qualify and how to apply those deductions on your return.

❌ “It’s only for big corporations.” → False. Even smaller investors can benefit.
❌ “It’s too complicated.” → Firms handle the heavy lifting. The tax savings usually far outweigh the cost.
❌ “It’s risky.” → Not if you document and follow IRS guidelines properly.

 

Keep it legit by following these best practices:

Use licensed professionals who follow IRS-approved engineering methods.

Keep organized records and copies of your study.

Stay in touch with your CPA as tax laws change.

Done right, it’s a perfectly legal and powerful way to boost returns.

 

Commercial Building: Owner reclassified lighting and interior finishes, freeing cash for a second investment.

Industrial Site: Reallocated equipment and land improvements to shorter schedules — resulting in a six-figure refund.

You don’t need a massive portfolio for it to work — it’s all about timing and good documentation.

 

Just bought a property? Commission a study within the first year.

Already own real estate? Ask about a “look-back” study for retroactive benefits.

Renovating? Track costs for fixtures, landscaping, and parking — they often qualify.

Plan ahead. Integrate cost segregation into your long-term tax and growth strategy.

Let’s say you buy a $1 million rental property. Normally you’d depreciate $800 k (building value) over 27.5 years ≈ $29 k per year.

With cost segregation, you could move $200 k into shorter categories (5- to 15-year life) and take $60–70 k in deductions the first year.

That’s more cash in your pocket now — to reinvest, upgrade, or simply exhale.

 

✔️ Rental property owners
✔️ Commercial property investors
✔️ Short-term rental hosts with active business status
✔️ Developers or builders
✔️ LLCs or partnerships with real estate assets

 

Cost segregation isn’t a loophole — it’s a smart IRS-approved tool for building wealth through real estate.

✅ Accelerate depreciation
✅ Increase cash flow
✅ Reinvest strategically
✅ Maximize long-term returns

For San Luis Obispo County and Central Coast investors, it’s one of the simplest ways to make your properties work harder for you.

 

Want to see if cost segregation fits your portfolio? Let’s chat.
I can connect you with trusted tax professionals and help you map out your next move.

 Schedule a Consultation 
📧 dmvonderheide@gmail.com | 📞 805-234-0640
Instagram: @diannavond
Your San Luis Obispo County Real Estate Expert
Lic. #01475327

Disclosure: Dianna Vonderheide is not a tax professional or CPA.  Please consult your CPA or Tax Advisor regarding any tax related concerns.

This Hasselback potatoes recipe makes baked potatoes with a fan of thin, crispy slices. It’s a side dish to impress!

 

Prep Time:

15 minutes Cook Time: 1 hour 15 minutes

 

6 medium russet potatoes (12 to 13-ounces each)

2 tablespoons

olive oil

3/4 teaspoon

kosher salt

3 tablespoons

salted butter (or vegan butter)

1 garlic clove, grated

1/2 teaspoon

Italian seasoning

Flaky sea salt, for garnishing

1 tablespoon

finely chopped parsley or chives, for garnishing

Other toppings, as desired (sour cream, cheese, green onions, bacon, etc)

1. Preheat the oven to 450°F.

2. Wash and dry the potatoes.

3. Place two chopsticks* along the sides of a potato: these will act as guides to prevent cutting all the way through. Slice a potato into 1/8th-inch slices, being careful not to go all the way through to the bottom using the guides. Pay special attention to the ends of the potatoes that need a shallow cut: the guides won’t help here! Repeat for each potato.

4. Place the potatoes on a parchment or aluminum-foil lined baking sheet. Brush with 1 tablespoon of the olive oil.

5. Bake for 60 minutes, until the potato slices are starting to separate. Remove the tray from the oven and brush it with the remaining 1 tablespoon olive oil. Evenly sprinkle with the 3/4 teaspoon

kosher salt

.

6. Return the potatoes to the oven and bake for 10 to 15 minutes (or less for smaller potatoes), until crispy, lightly browned, and easily pierced with a paring knife. Meanwhile, in a small saucepan, melt the butter. S

in the garlic and Italian seasoning and remove from the heat.

7. When the potatoes are done, remove them from the oven and brush with the melted seasoned butter, making sure to evenly distribute the seasonings that sink to the bottom. Gently fan the potatoes with onehand while sprinkling a bit of flaky sea salt over the potatoes. Garnish with parsley or chives and serve immediately.

 

Don't forget to tag me with a photo!

WORTH CHECKING!

We hope you enjoyed this week’s newsletter and found something that inspires you as you head into the weekend. Stay tuned for more exciting updates, tips, and stories next week!

 

Have a fantastic Friday and a wonderful weekend ahead!