How Trump, Grant Cardone, and Blackstone Use Cost Segregation to Pay Little (or No) Taxes—and How You Can Too

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When you own real estate, the magic isn’t just in appreciation or rent checks—it’s also in the tax benefits. One of the most powerful (but often overlooked) tools is cost segregation.

Done right, it can supercharge your cash flow, unlock bonus depreciation, and create massive tax savings—especially when paired with the right strategies.

Let’s break it down.

What Is Cost Segregation?

Normally, the IRS lets you depreciate residential rental property over 27.5 years (39 years for commercial). That means every year, you get a tax deduction based on the building’s value.

But here’s the problem: waiting nearly three decades to fully depreciate your property is slow.

Cost segregation changes the game.

Through a cost segregation study, you separate (or “segregate”) different components of your property—like carpets, appliances, fixtures, and even landscaping. Instead of lumping everything into the 27.5- or 39-year bucket, you can classify some assets into 5-, 7-, or 15-year property.

That means bigger deductions, sooner.

Why It Matters: Accelerated Depreciation = More Cash Flow

Here’s the math:

• Buy a $500,000 rental property (building value: $400,000).

• Standard depreciation: ~$14,500 per year.

• With cost segregation: You might shift $100,000+ into 5-, 7-, and 15-year categories.

• That could mean $20k–$30k in first-year deductions.

Bigger deductions = lower taxable income = more cash you keep in your pocket.

Bonus Depreciation: Supercharging the Benefit

Here’s where it gets even better.

The Tax Cuts and Jobs Act allowed 100% bonus depreciation on qualifying assets with useful lives of 20 years or less. This meant investors could write off the entire cost of certain property in the first year.

That benefit is phasing down (80% in 2023, 60% in 2024, and so on), but it’s still incredibly powerful.

Pairing bonus depreciation with a cost segregation study can unlock massive front-loaded deductions—giving you more money to reinvest sooner.

The Catch: Passive Activity Rules

Of course, the IRS doesn’t hand out free lunches.

Most rental real estate is considered passive activity. That means your losses (including depreciation) can only offset passive income, not your W-2 salary or active business income.

So, while cost segregation might generate huge “paper losses,” you can’t always use them against your regular income… unless you qualify for a special status.

Real Estate Professional Status: The Golden Ticket

If you (or your spouse) qualify as a Real Estate Professional in the eyes of the IRS, you may be able to use those losses against your active income.

The rules are strict:

• You must spend 750+ hours per year in real estate activities.

• Those hours must be more than half of your total working hours.

• You must materially participate in the properties.

For high-income investors, this can mean tens (or even hundreds) of thousands in tax savings each year.

Should You Consider Cost Segregation?

Cost segregation isn’t for every investor. The studies can cost a few thousand dollars, and if your property is smaller, the benefits may not outweigh the cost.

But for larger properties—or if you’re trying to maximize deductions while qualifying as a real estate professional—it can be a game-changing strategy.

Final Thoughts

Real estate isn’t just about bricks, mortar, and tenants. It’s about using the tax code to your advantage.

Cost segregation + bonus depreciation + the right tax status = serious cash flow acceleration.

Talk to a tax professional before making the move, but don’t overlook this tool. For the right investor, it can unlock savings that fuel the growth of your portfolio.

👉 Have you ever used cost segregation on one of your properties? What was your experience?

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