Tax Savings and Cost Segregation Studies w/Terry Judge
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Episode Description
Welcome to the Freedom Point Real Estate podcast! This week, Jeremy Dyer interviews Terry Judge asking about what a cost segregation study is, why it's beneficial to the operator and limited partner investor, and much more.
Terry Judge is the Founder and CEO of CORE Solutions Group, LLC. He is the visionary behind the brand and oversees much of the growth and strategic business planning. Terry has an extensive entrepreneurial background with over 25 years in business ownership and is one of the early adapters of engineering-based cost segregation studies, as well as other highly specialized tax credits and incentives. He has a passion for educating people in the commercial and multi-family space on how to maximize cash flow and take full advantage of the ever-changing tax code. Terry speaks nationally and has published several white papers on the magic of cost segregation. Terry has both a tax and engineering background and over the last 15 years, along with his team, have completed thousands of engagements that has yielded over a BILLION DOLLARS in NET TAX SAVINGS. Today, Terry and his firm CORE Solutions Group, are blessed to work with so many of the top accounting, real estate firms as well as the brand-new investors who just purchased their first multifamily investment property! Terry is a firm believer in giving back and supports several local charities in Detroit through its newly formed charitable arm called CORECARES.
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LinkedIn: https://www.linkedin.com/in/coresolutionsgroup/
Website: https://coresolutionsgroup.net/
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Website: https://startingpointcapital.com/
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Book a Call! https://calendly.com/startingpointcapital/discuss-investing-with-jeremy-dyer?month=2023-12
Summary
Tip #1: Understand the Basics of Cost Segregation
"Cost segregation helps property owners save on taxes by accelerating the depreciation of property components." Terry Judge explains that cost segregation is a tax planning strategy allowing property owners to increase cash flow by reclassifying assets to accelerate depreciation deductions. By understanding the basics, investors can unlock significant tax savings. This strategy is particularly useful for those with investment properties, enabling them to reduce taxable income and increase cash flow.
Tip #2: Consider the Value of Smaller Properties
"Now, $300,000 is pretty juicy in terms of tax savings." Terry Judge emphasizes that even smaller properties, valued at around $300,000, can benefit from cost segregation. This opens up opportunities for investors with smaller portfolios to take advantage of tax savings that were previously thought to be available only to larger investors. The potential savings can significantly impact the financial performance of smaller rental properties.
Tip #3: Utilize Bonus Depreciation
"In 2024, any purchases or acquisitions made this year are going to get 60% of it upfront." Terry Judge highlights that bonus depreciation allows for a large portion of an asset’s cost to be depreciated in the first year. Although the percentage has decreased from 100% to 60% in recent years, it still offers substantial immediate tax benefits. Investors should take advantage of this provision to maximize their upfront tax deductions.
Tip #4: Retroactive Cost Segregation
"We can go back in time by the way. The IRS will allow one time provision... we can go back 10 years and we’ll redo all the depreciation." Terry Judge mentions that investors can perform retroactive cost segregation studies on properties they have owned for up to 10 years. This means that property owners who missed out on initial cost segregation can still benefit from significant tax savings. This retroactive application allows for adjustments to be made without amending past tax returns.
Tip #5: Work with Experts
"We handle everything in-house. We just do it on their behalf." Terry Judge underscores the importance of working with experts who handle the complexities of cost segregation studies. His firm, Core Solutions Group, manages the entire process, including working directly with the client's CPA. This ensures accuracy and maximizes the tax benefits while minimizing the burden on the property owner.
Tip #6: The Impact of Bonus Depreciation Legislation
"It has been passed in Congress; it is bipartisan that they want to bring it back." Terry Judge discusses the legislative landscape, noting the bipartisan support for reinstating 100% bonus depreciation. This could significantly benefit real estate investors by allowing them to fully depreciate qualifying property in the year of purchase. Staying informed about legislative changes is crucial for investors to capitalize on potential tax benefits.
Tip #7: Bonus Depreciation for Different Property Types
"The IRS basically says screw all that, we're going to let you compress it into year one." According to Terry Judge, bonus depreciation applies to various property types, including residential and commercial properties. By allowing accelerated depreciation, investors can see immediate tax savings. This flexibility makes bonus depreciation a valuable tool for different investment strategies.
Tip #8: Addressing Misconceptions
A lot of people are kind of shocked." Terry Judge points out that many property owners are unaware of the benefits of cost segregation. Misconceptions about its applicability and complexity prevent them from pursuing these tax savings. Educating investors about the real potential of cost segregation can lead to substantial financial benefits.
Tip #9: The Role of Cost Segregation in Real Estate Investment
"CET has been one of those strategies that have outlived whatever Democrat or Republican administration." Terry Judge notes that cost segregation remains a valuable strategy regardless of political changes. Its consistent benefits make it a reliable tool for real estate investors. Understanding its role can help investors make informed decisions about property acquisitions and tax planning.
Tip #10: Giving Back to the Community
"We raise money for local charities... it's called New Hope." Terry Judge shares his commitment to philanthropy through his organization, Synergy Detroit. Supporting local charities like New Hope, which assists families affected by cancer, reflects his belief in giving back to the community. This philanthropic approach not only benefits the community but also builds a positive reputation for his business.
