Changes in the Tax Cuts and Jobs Act have made this strategy even more attractive to real estate investors.
Under the new Tax Cuts and Jobs Act, the benefits of combining cost segregation and Section 1031 exchanges have become an even more important tax strategy for real estate investors than ever.
With the recently passed TCJA, the rules for Section 1031 exchanges have been modified and the depreciation rules have been expanded. The interplay of these new rules creates a number of opportunities that one might overlook. This includes the ability to utilize a cost segregation study to identify short life assets that will be fully depreciated and ultimately retired. These no-value assets are then not considered to be a part of the Section 1031 exchange – resulting in no depreciation recapture tax.
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