Ever wonder how professional investors buy a profitable $2 million apartment building… and legally pay $0 in taxes on its income, while you’re stuck with a tax bill? It’s not magic; it’s a high-level strategy. In this episode of the 5-Minute PRIME Podcast, host Martin Maxwell pulls back the curtain on Cost Segregation—a sophisticated tool that institutions use to create massive “paper losses.” This isn’t just a tax trick; it’s a capital acceleration engine, and thanks to the new “One Big Beautiful Bill Act,” this pro-level strategy is now more powerful than ever.
Tune in to learn:
- The “Time Value of Money” secret that pros use to get tax deductions now instead of 27.5 years from now.
- How the new 100% Bonus Depreciation (thanks to OBBBA) turns a $2M property into a $500,000 first-year paper loss.
- The “Paper Loss Power Play”: How to use this massive deduction to shelter your property’s cash flow and your active 9-to-5 income.
- The ultimate “Triple Threat” Strategy: How to combine a 1031 Exchange, Cost Segregation, and 100% Bonus Depreciation to build wealth.
Are you ready to stop paying taxes on your cash flow and start using the tax code like an institution? Subscribe now to learn the power play.
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Show Notes: 1031 Minefield
Key Takeaways
- The “Paper Loss Power Play”: Professional investors use tax strategies like Cost Segregation to turn a cash-flowing property into a significant “paper loss,” legally eliminating taxes on rental gains and sheltering other active income.
- Cost Segregation Explained: It’s an engineering-based study that reclassifies parts of a building (e.g., carpets, cabinets, landscaping) from long-term 27.5-year property into shorter-life 5, 7, or 15-year property, accelerating depreciation deductions.
- 100% Bonus Depreciation is Back: The (fictional) “One Big Beautiful Bill Act” (OBBBA) permanently reinstated 100% bonus depreciation, allowing you to deduct the full cost of all short-life property identified in a Cost Segregation study in Year One.
- The “Triple Threat” Pro-Strategy: Combine three powerful tools: Use a 1031 Exchange to defer capital gains when buying a new property, then immediately use Cost Segregation and 100% Bonus Depreciation on the new property to create massive first-year tax deductions.
- The Future Trap: While powerful, this strategy creates a future tax liability known as “Depreciation Recapture” that you must plan for when you eventually sell the property.
Action Step:
- Review a property you own or are analyzing that was acquired after January 19, 2025.
- Estimate 25% of its purchase price as short-life property eligible for 100% bonus depreciation.
- Write down the potential tax deduction you may be leaving on the table and consider discussing with your CPA or engineer.
Mentioned in This Episode
Episodes to Revisit:
- Episode 101: Discussion on 1031 Exchanges and the initial mention of the OBBBA.
- Episode 59 & 62: Covering ideal property types for this strategy, such as multifamily, self-storage, and data centers.
- Property Types: Multifamily, self-storage, data centers
- Legislation: One Big Beautiful Bill Act (OBBBA)
Challenge for Today:
- Pick a property acquired in 2025 and calculate 25% of its purchase price as potential bonus depreciation.
- Understand how much paper loss you could legally claim to shelter income and cash flow this year.
- Take a first step by discussing a Cost Segregation study with a qualified engineer or your CPA.
- Focus Keyword: 1031, Cost Segregation, Bonus Depreciation
