In this episode of Zen and the Art of Real Estate Investing, Jonathan sits down with Gian Pazzia, chairman of KBKG and one of the earliest experts in cost segregation. With more than two decades of experience helping everyone from Fortune 500 companies to small-scale landlords, Gian breaks down how real estate investors can take full advantage of the tax code to save money, grow wealth, and stay ahead of the curve.
Accelerating Depreciation with Confidence
Gian clarifies that cost segregation isn’t a loophole. It’s a well-documented tax strategy backed by IRS guidelines. By separating building components into shorter-life assets, investors can front-load depreciation and dramatically reduce taxable income in the early years of ownership. With bonus depreciation returning to 100% in 2025, the opportunity becomes even more powerful.
Real-World Tax Strategies That Work
- Gian and his wife own and manage over 40 rental units across several buildings.
- They use cost segregation to offset active income by qualifying her as a real estate professional.
- Their approach includes applying bonus depreciation when it’s most advantageous.
- They leverage short-term rentals for flexible depreciation without needing 750 hours.
Gian also underscores the benefits of estate planning strategies tied to depreciation. For example, if older investors don’t do cost segregation studies before passing assets to heirs, unused depreciation may be lost permanently. Acting early preserves long-term wealth for future generations.
Takeaways for Investors at Every Level
- Work with credentialed cost seg professionals—not general CPAs—to avoid mistakes.
- Time your deductions to match expected income shifts.
- Don’t ignore the power of short-term rentals in your tax strategy.
- Use cost seg software to model scenarios for single-family homes and small portfolios.
- Consider estate implications when planning your depreciation timeline.
Whether you’re holding one rental or building a multi-unit portfolio, Gian’s message is clear: Real estate investors who ignore the tax advantages sitting in the code are leaving money on the table. The tools are there. Investors just need to use them wisely.
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