Cost Segregation for Real Estate Investors With Gian Piazza
In this episode of Own Your Power, Rod Khleif sits down with Gian Piazza to unpack how cost segregation for real estate investors can dramatically improve cash flow and long term wealth creation. The conversation focuses on how strategic tax planning often becomes the missing link for high earning professionals and real estate investors who are growing portfolios but overpaying in taxes. Gian explains why depreciation is not just an accounting concept, but a powerful lever that can directly impact investment performance.
How Cost Segregation Accelerates Investor Returns
Gian breaks down cost segregation in practical terms, explaining how engineering based studies identify components of a property that can be depreciated faster than the standard schedule. By front loading depreciation, investors are able to significantly reduce taxable income in the early years of ownership. This strategy increases after tax cash flow, allowing investors to reinvest capital into new acquisitions, renovations, or debt reduction rather than sending it to the IRS.
The discussion highlights that cost segregation for real estate investors is especially impactful for multifamily, commercial, and value add properties. Gian also explains how lookback studies allow investors to apply cost segregation retroactively on properties purchased years ago, creating immediate tax benefits without refinancing or selling.
Who Benefits Most From Cost Segregation Strategies
Rod and Gian emphasize that high income earners, active real estate investors, and those scaling multifamily or commercial portfolios tend to see the greatest upside. Investors who qualify as real estate professionals may be able to offset active income using accelerated depreciation, making the strategy even more powerful. Even with bonus depreciation phasing down, Gian explains why cost segregation remains a relevant and effective tool when paired with long term tax planning.
Key investor profiles that often benefit include:
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Multifamily owners executing value add business plans
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Commercial property investors with recent acquisitions or renovations
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High income professionals investing in passive or active real estate
Avoiding Common Cost Segregation Mistakes
The episode also addresses common misconceptions and risks. Gian stresses the importance of using qualified professionals who perform engineering based studies and maintain proper documentation. Conservative assumptions, audit defensibility, and coordination with a CPA are critical to ensuring the strategy is both compliant and sustainable. Cost segregation is not about aggressive shortcuts, but about applying the tax code correctly and strategically.
About Gian Piazza
Gian Piazza is a cost segregation expert who works closely with real estate investors to optimize depreciation strategies and improve after tax returns. With a background in engineering based cost studies and tax strategy, Gian helps investors unlock hidden value in their properties while maintaining compliance and audit readiness. His work supports multifamily and commercial investors nationwide.
If you want to hear the full conversation and detailed insights, watch the podcast video or read the complete transcript below.
What is cost segregation for real estate investors?
Cost segregation for real estate investors is a tax strategy that accelerates depreciation by breaking a property into components with shorter depreciation lives. Instead of depreciating an entire building over decades, certain assets are written off much faster. This results in larger tax deductions in the early years of ownership.
How does cost segregation for real estate investors work?
Engineers and tax professionals analyze a property to identify components that qualify for accelerated depreciation. Items such as flooring, electrical systems, plumbing, and exterior improvements are reclassified. These components are then depreciated over shorter time periods, increasing near term tax benefits.
Why do real estate investors use cost segregation?
Real estate investors use cost segregation to reduce taxable income and improve cash flow. By front loading depreciation, investors keep more capital in their business. This additional liquidity can be used for acquisitions, renovations, or debt reduction.
Who benefits most from cost segregation for real estate investors?
High income earners, active real estate investors, and those owning multifamily or commercial properties benefit the most. Investors with recent acquisitions or value add renovations often see the largest impact. Real estate professionals may also be able to offset active income using depreciation losses.
Does cost segregation still make sense with reduced bonus depreciation?
Yes, cost segregation remains effective even as bonus depreciation phases down. Accelerated depreciation still creates significantly higher deductions compared to straight line depreciation. Strategic timing and long term planning can preserve strong tax advantages.
What types of properties qualify for cost segregation for real estate investors?
Multifamily, self storage, medical office, retail, industrial, and hospitality properties commonly qualify. Properties with renovations or capital improvements are especially strong candidates. Older properties may also qualify through a retroactive cost segregation study.
How does cost segregation affect real estate investor cash flow?
By lowering current tax liability, cost segregation increases after tax cash flow. Investors retain more income from operations or distributions. This enhanced cash flow improves overall investment performance.
Is cost segregation for real estate investors safe and compliant?
When performed using an engineering based study by qualified professionals, cost segregation is supported by tax law. The key is proper documentation and conservative assumptions. Experienced providers help ensure compliance and audit defensibility.
Can cost segregation create tax losses for real estate investors?
Yes, cost segregation often generates paper losses through accelerated depreciation. These losses can offset passive income and, in some cases, active income for qualifying investors. This makes it a powerful tool for tax planning.
When should real estate investors consider a cost segregation study?
The ideal time is the year of acquisition, completion of renovations, or stabilization. However, investors can also perform a lookback study on properties purchased in prior years. Timing the study to align with higher income years can maximize benefits.
Disclaimer: This summary was written with the help of AI and reviewed by Rod’s Team.
01:20:07:26 – 01:20:29:27
Rod Khleif
Welcome back to lifetime cash flow through real estate investing. I’m Rod Khleif, and I’m thrilled you’re here. I know you’re going to get tremendous value from the gentleman I’m interviewing today. His name is John Kasia, and he’s a, really a nationally recognized expert. In pretty much anything tax relating to real estate. He’s, he has a leading firm that does cost segregation studies.
01:20:29:27 – 01:20:35:23
Rod Khleif
They’ve got offices all over the country. And, we’re going to get a lot of value today. Jean, welcome to the show, bro.
01:20:35:27 – 01:20:38:09
Gian Piazza
Thanks for. I’m super excited to be here.
01:20:38:12 – 01:20:54:06
Rod Khleif
Thank you, thank you. Yeah, I know that we were going to do this live, and I’m embarrassed to say I had an emergency come up. If I recall. I don’t remember why I had to I had to cancel. And so now we’re doing this on zoom, but, you know, the bottom line is the material is the material is the material.
01:20:54:06 – 01:21:12:18
Rod Khleif
So we’ll, you know, let’s let’s let’s have some fun and get into it. What, what, you know, give us a little background on you and why you got into this, into this business. You know, give give us a little. You can do a much better job with your profile than that. Where? Your background than I just did.
01:21:12:20 – 01:21:40:28
Gian Piazza
Yeah. Yeah. So my background’s in civil engineering. Structural engineering? I went to school at Purdue University, and, you know, sometime in my third or fourth year, I was on the five year plan, by the way. I ended up realizing, you know, I don’t want to be, civil engineer. That was designing buildings. And so I started looking for, jobs that would use my civil engineering degree that were outside of that field.
01:21:41:01 – 01:21:50:00
Gian Piazza
So I ended up finding a job with Arthur Andersen, which at the time was one of the biggest CPA firms in the world.
01:21:50:02 – 01:21:54:13
Rod Khleif
Yeah, there’s some history there. Yeah, a lot of a lot of stuff there. Yeah.
01:21:54:15 – 01:22:00:23
Gian Piazza
A lot of history there. But, you know, they were at the time known as, you know, the leading.
01:22:00:23 – 01:22:01:19
Rod Khleif
Oh, they were the one.
01:22:01:19 – 01:22:32:08
Gian Piazza
Yeah. Yeah, they were the one. Yeah. And so they needed civil engineers to do cost segregation study. So this was back in the 90s when, really it hadn’t become popular and it was really confined to really large fortune 100 corporations. And so, they brought me on and I was looking through blueprints. I was, I was working with, like the casinos in Las Vegas that everyone knows, the, the big pharmaceutical companies that everyone knows.
01:22:32:08 – 01:22:54:13
Gian Piazza
And in their manufacturing plants where they’re spending hundreds of millions of dollars to build these things out. And, and so they needed me, to basically go through all the construction cost invoices and details and blueprints to start segregating all the components of the buildings that, could be treated differently for tax. Right. And so let’s.
01:22:54:13 – 01:23:06:23
Rod Khleif
Let’s, let’s take a second and step back from your story. Just take a minute and tell people that have no clue what we’re talking about. What what what is a cost segregation study and why would you want to do it.
01:23:06:25 – 01:23:37:07
Gian Piazza
Yeah, yeah. So cost segregation is a way for real estate investors to pay less in income tax by writing off parts of their building a lot faster than the building itself. Okay. And so normally a building is supposed to be written off over 39 years if it’s a commercial building or 27.5 years if it’s residential rental. But not everything in the building fits into this category in the tax code.
01:23:37:11 – 01:24:02:01
Gian Piazza
Okay. And so that a lot of the stuff inside the building, can actually be treated differently and written off. There’s a bunch of different tax lives. It can be written off all in year one, year five. Yeah. Or five years. Seven years, 15 years. So there’s all these different categories. And so a cost segregation study, breaks all these components into a report and puts a value to them.
01:24:02:01 – 01:24:06:17
Gian Piazza
And so we’re talking about, you know, just to give you some context, some value.
01:24:06:17 – 01:24:09:13
Rod Khleif
And a value in a remaining life, correct.
01:24:09:15 – 01:24:44:00
Gian Piazza
That’s right, that’s right. Okay. And how it should be treated for tax. So like if you’re thinking of a multifamily development, if things like the electrical wiring that are in that connect to the appliances or the plumbing at a click next to the appliances, the appliances themselves can also be, you know, written off quicker, things like ceiling fans, certain types of vinyl flooring, even outside the building, land improvements such as the driveways, the asphalt paving, landscaping, etc. all these things, the things we identify in a costing study.
01:24:44:03 – 01:25:01:29
Rod Khleif
By the way, guys, as goes out, I’ve had to pay to resurface many asphalt. So, you know, all this stuff has a remaining life. Before you move on, give a couple of examples of how much life like an appliance might have, or a wiring or something, maybe a couple other examples so people get an idea.
01:25:02:01 – 01:25:30:12
Gian Piazza
Yeah. So, so in the tax code if we’re talking about multifamily. Pretty much anything inside the building like that I mentioned the cabinetry, the wiring. They get a five year tax life. So if you spent 100 grand on these things you write them off over five years. So call it 20 grand a year. There’s also some other rules that allow you to write these off all in year one that we can get into.
01:25:30:14 – 01:25:46:24
Gian Piazza
Right. And then things outside the building like the driveways, asphalt paving, landscaping, a written off over 15 years. And and everything else is generally over 27.5 here. And what I say.
01:25:46:26 – 01:25:53:23
Rod Khleif
Okay. Okay, okay. Sorry to keep interrupting. I just don’t want people to have their eyes crossed not know what we’re talking about. Okay.
01:25:53:26 – 01:25:57:00
Gian Piazza
Yeah, yeah, yeah. So anyway, you know, so you.
01:25:57:00 – 01:26:10:18
Rod Khleif
Went to Arthur Andersen, you started doing big, casinos and just to get you back on track, casinos and, big pharmaceutical companies. Which of course, I’m sure were big lobbyists to make this stuff come through in the first place. Then what?
01:26:10:20 – 01:26:33:19
Gian Piazza
Yes. So learned at my teeth. Learning at at that big firms. And then in the late 90s, ended up moving to G. And, we started, you know, this cost segregation firm. And at the time, there wasn’t a lot of firms outside of those big, huge CPA firms that were doing this. So we were one of the first.
01:26:33:21 – 01:27:02:02
Gian Piazza
Since then, we’ve expanded nationally, offices all over the country, and also into other service areas that help with tax, issues related to real estate. And so, you know, I’ve also along the way, fortune cumulated my own, real estate portfolio. So, you know, I’m an active investor. So, you know, I kind of understand both sides of the, the coin there and, yeah, I’m happy to kind of be here.
01:27:02:02 – 01:27:03:06
Gian Piazza
That’s why I’m here.
01:27:03:08 – 01:27:18:25
Rod Khleif
Well, so, so, you know, we talked about cost segregation briefly, how you can basically accelerate the depreciation, talk about how you can do it more in, in year one and maybe some of the recent legislation and or changes, that relate to that.
01:27:19:02 – 01:27:48:24
Gian Piazza
Yeah. So, just recently with the big beautiful bill that Trump passed in in July, it allows for all of the things that you segregate in a cost segregation study to be written off in year one through what’s called 100% bonus depreciation, that, you know, if you hear that that term, it just means that anything with a tax life that’s 20 years or less, you get to write off on year one.
01:27:48:26 – 01:28:01:08
Gian Piazza
And, and they’ve made that permanent. And that starts for any buildings or assets purchased on January 20th, 2025 and thereafter.
01:28:01:10 – 01:28:24:00
Rod Khleif
It’s fantastic. You know, for, for, you know, the Biden administration had cut it back. It was 80% and 60%. And and Trump bought it, brought it back, which is fantastic. And, you know, and and so, a question that, that, I have is, is how does this compare to, well, well, let me, let me back up.
01:28:24:00 – 01:28:41:06
Rod Khleif
So, so effectively someone that buys a building now or bought a building, you know, January of this of last year, what what sort of write offs first year write off on a percentage basis can be possible. I again, I know, but I want them to hear from you.
01:28:41:08 – 01:29:07:17
Gian Piazza
Yeah, yeah, I can kind of walk you through some numbers and an example here. So let’s think about let’s think about like a $300,000 rental home that someone purchases. Right. So step one is you get to separate the land value from the building value. Right. So you bought it for 300,000. So let’s say assume that the land value is $30,000 and the building value is $270,000.
01:29:07:22 – 01:29:13:02
Rod Khleif
All right. Because you can’t depreciate the land guys okay. So you can only depreciate this. What’s above the ground okay.
01:29:13:05 – 01:29:27:16
Gian Piazza
That’s right. So so the 270 we can we can depreciate. So normally you’re going to get a $10,000 deduction for 27 years. Right. Gets a $270,000.
01:29:27:19 – 01:29:29:16
Rod Khleif
Oh that’s a simple example right.
01:29:29:19 – 01:29:56:27
Gian Piazza
Right. So that’s that’s normal right. But with the cost segregation study you could find as much as 25% of that building value that can be written off in year one. So now we’re looking at a $54,000 deduction in year one compared to that $10,000 deduction. Right. So that’s a $44,000 increase in tax deductions that you can get by doing this cost segregation study on this small property.
01:29:56:29 – 01:30:01:04
Gian Piazza
So right the numbers are, you know, are very enticing.
01:30:01:07 – 01:30:14:06
Rod Khleif
Yeah I’ve seen bigger percentages than that. You know, somebody that invests in a, apartment complex, I’ve seen as much as 60%, even a little more than that right off year one with that 100% bonus depreciation.
01:30:14:08 – 01:30:38:12
Gian Piazza
And yeah, what you’re probably referring to is, is if there is like an LP investor that’s investing cash in, they’re leveraging. Right. So if they put, you know, if there’s a 60% loan on the property, right, you might only have to pay, you know, for a $100,000 property, you might only put $40,000 cash up. Right. You get to depreciate the entire amount that the loan cost as well.
01:30:38:17 – 01:30:38:25
Gian Piazza
Hello.
01:30:38:29 – 01:30:46:17
Rod Khleif
My my my limited math brain didn’t didn’t now didn’t communicate that piece. That’s right okay.
01:30:46:17 – 01:31:03:24
Gian Piazza
Yeah yeah. So so so so normally even in my situation if you only on a $270,000 property, if you only put up whatever it is, whatever the 40% or 30% of that is, you would get about 60%, of your equity investment back in a depreciation.
01:31:03:24 – 01:31:28:07
Rod Khleif
Yeah, it’s it’s fantastic. I mean, it’s absolutely fantastic. So let me ask you this. How does how does this compare to a 1031 exchange? 1031 tax deferred exchange? Because I have heard that, you know, if you continue to buy properties, it’s it can be as effective in tax mitigation as that. But you tell me to talk about that for a minute or.
01:31:28:10 – 01:31:30:24
Rod Khleif
Yeah. Great. Tell me how that’s the case.
01:31:30:26 – 01:31:55:06
Gian Piazza
Yeah. I mean there’s a lot of similarities. You know, in a 1031 exchange is the main goal is to cover any of the gains, right? So you buy a property for a million, you sell it for 3 million, right? You exchange it. You don’t have to pay any of the gains. It you know, I would say that the two strategies work very well in combination to each other.
01:31:55:06 – 01:32:24:25
Gian Piazza
Oh, okay. But you might buy your first property. Right. And not even doing the exchange yet. You could do the cost segregation on the first property, accelerate all these deductions, utilize the deductions to save on taxes. Okay. And then when you sell that property, you can actually do a 1031 exchange on it and continue to, you know, get the benefits of the 1031 exchange in combination with cost seg.
01:32:24:27 – 01:32:45:16
Gian Piazza
But yeah, they they are both super powerful, like kind of in their own little way. Whereas one’s one’s protecting, the gains you’re making and one is just taking things as much as possible as soon as you buy the building, whereas the other one is protecting the gains after you bought that building that got it.
01:32:45:18 – 01:33:09:07
Rod Khleif
Got it, got it. So, just to let I know this question will come up if someone were asked if we were taking questions, what what is it cost? Segregation, study cost. You know, let’s say you’re talking about a oh, just a small multifamily purchase. Say, say $3 million purchase. Just just out of curiosity, what could they expect to pay for that?
01:33:09:10 – 01:33:18:12
Rod Khleif
And what are some of the requirements from a timing standpoint or anything like that? Could you could you speak a little logistically about. Yeah. What what’s involved.
01:33:18:15 – 01:33:34:00
Gian Piazza
Yeah. And on an average property like that, about five grand, let’s say it could be plus or minus a little bit, depending on the facts. And as far as timing goes, they need to be done before you file the tax return, for the property that you saw.
01:33:34:00 – 01:33:43:00
Rod Khleif
They could be done the year you’re filing the return for the previous year. It just it just the where the key piece is that has to be completed before you actually filed the return.
01:33:43:02 – 01:33:51:06
Gian Piazza
That is correct. Yeah. So there’s some confusion around that. But yeah you’re right. And you want to make sure you do it. You don’t want to wait to do.
01:33:51:06 – 01:33:57:12
Rod Khleif
It as soon as possible. Sure. But you don’t have a timeline for getting it done other than the actual return being filed.
01:33:57:14 – 01:34:09:02
Gian Piazza
That’s right. Okay. I always say, you know, it’s going to take about 6045 days or so. Plus or minus to get it done. So make sure you give your tax preparer plenty of time. And.
01:34:09:08 – 01:34:30:18
Rod Khleif
And does the tax preparer need to have some, some experience with this strategy. Because I know you bring in an engineering firm, which is kind of kind of what you guys are, right? I mean, would you call yourself that or you’re more of a how would you define KP? I’m sorry, KP, kb kg how would you define that company.
01:34:30:21 – 01:34:40:08
Gian Piazza
Yeah. So I would define us as a tax incentives firm. And okay, we employ engineers, attorneys, tax specialists.
01:34:40:10 – 01:34:40:21
Rod Khleif
Okay.
01:34:40:28 – 01:34:41:07
Gian Piazza
Folks.
01:34:41:07 – 01:34:43:10
Rod Khleif
Yeah okay okay. Got it. Okay.
01:34:43:10 – 01:35:04:18
Gian Piazza
But but to your question, I think you were asking, you know, does the CPA need to have some familiarity with it. And the answer is yes. Yes. This all types of, you know, look, there’s all types of tax situations, right? And sometimes there’s nuances that go with this because we’re we’re talking about tax and where everybody’s got different situations and partnerships and exchanges and all that stuff.
01:35:04:18 – 01:35:28:15
Gian Piazza
Right. And and look, you know, if you’re kind of a single taxpayer by and or one building, and you do a cost seg probably not going to be that difficult for your CPA, but it but, you know, if you’re more sophisticated and you’re doing, you know, interesting things to raise capital and bring in other investors, that’s where it starts to get nuanced.
01:35:28:17 – 01:35:35:00
Gian Piazza
And, you know, you would want maybe a CPA that has more experience specifically in real estate.
01:35:35:03 – 01:35:58:26
Rod Khleif
Got it, got it, got it. So, but my next question would be, just as it relates to just this is for my own benefit. Like, you know, you’re you’re a tax strategist as well. Your firm does tax strategy. What are some other, well known or not well known strategies that you’ve implemented with your clients?
01:35:58:28 – 01:36:05:10
Rod Khleif
You know, is there 1 or 2 you might mention today that people may not have heard of.
01:36:05:13 – 01:36:13:13
Gian Piazza
My favorite, is is is related to, estate tax planning. Is it as it relates to that?
01:36:13:16 – 01:36:23:09
Rod Khleif
So that is so crazy. I literally have my estate tax stuff. Right? Yeah. You can’t see it. It’s literally right here. I’m going to meet with an estate tax attorney today okay.
01:36:23:11 – 01:36:26:05
Gian Piazza
So very here we go. You’re in this good timing.
01:36:26:05 – 01:36:27:23
Rod Khleif
Yeah yeah yeah.
01:36:27:25 – 01:36:55:14
Gian Piazza
So, so let’s say, okay. So let me start with the way the tax rules work. When you own property, someone passes away. And what happens to, for tax purposes. So let’s say you bought a property. Let’s say mom and dad bought a property. Ten years ago. And five years ago. They have two properties they never did cost segregation.
01:36:55:20 – 01:37:29:12
Gian Piazza
Okay. And, maybe dad passes away first. There’s an opportunity here. Because what happens is, is when parents pass away, if they bought, let’s say, a property five years ago for $1 million and they started to depreciate that property rights, they got to take some write offs. Maybe there’s maybe there’s $700,000 in depreciation left on the date of death.
01:37:29:15 – 01:37:57:27
Gian Piazza
The beneficiaries, whoever’s inheriting the property, they get what’s called a step up, right. And to fair market value, and they get to start depreciation all over again from that, from that value. Okay. And so that means if the property that they bought five years ago for 1 million is now worth, 2.5 million, the beneficiary which could be mom or maybe the kids.
01:37:58:00 – 01:38:24:23
Gian Piazza
Right. They get that step up. Their new basis is 2.5 million, and then they can start depreciation all over again. Okay. So housing and that’s where cost segregation comes in. Most people know that when the step up happens you can do a cost seg on that new step up. Right. So accelerate as much depreciation as possible on that okay.
01:38:24:25 – 01:38:47:22
Gian Piazza
Here’s what people miss. When mom or dad were alive right. They didn’t take advantage of the cost. SEG as I mentioned, they never did cost SEG. But they could have and they should have, right? Because the tax laws allow it. And so the opportunity it’s time sensitive.
01:38:47:24 – 01:38:52:17
Rod Khleif
If you know where you’re going with this before the return final return gets filed discussing it.
01:38:52:20 – 01:39:13:20
Gian Piazza
Yeah. Before that final tax return is filed for the decedent’s right. You want to apply a cost segregation study to their final text to the property from five years ago. You want to accelerate what you missed. So there could be, you know, hundreds of thousands of dollars of depreciation that they should have taken while they were alive. Right.
01:39:13:20 – 01:39:28:00
Gian Piazza
And so so what’s going to happen now is on that final tax return, you’re going to pay a lot less tax for mom and dad because there’s all these extra deductions. And so I mentioned in my example, let’s say they before the cost seg they took.
01:39:28:02 – 01:39:28:18
Rod Khleif
300 and.
01:39:28:18 – 01:39:30:05
Gian Piazza
300,700.
01:39:30:05 – 01:39:30:20
Rod Khleif
Left.
01:39:30:22 – 01:39:51:25
Gian Piazza
And maybe they should have taken 200 more with the cost saving. So now you’re basis went from a million down to 500,000. Then did that. The step up that I talked about earlier still goes all the way back up to 2.5 million. It goes so so what I’m saying is, is whether you if you didn’t do the cost seg okay.
01:39:51:25 – 01:40:10:28
Gian Piazza
You’re you’re stepping up to 2.5 million from 700,000 with the cost seg. You’re you’re stepping up from 500,000 to 2.5 million. It’s a lose it or excuse me, use it. Use situation. Yeah. And it has to be done. Before that final tax return is fine.
01:40:10:29 – 01:40:15:12
Rod Khleif
But but then they could say, yeah, when the step up happens, you could do another cost and.
01:40:15:13 – 01:40:19:18
Gian Piazza
You can do it again. So it’s like it’s like a double dip here. Wow.
01:40:19:21 – 01:40:35:06
Rod Khleif
That’s fascinating. Okay. Well I learned something today that’s fascinating okay. So Jim talk for a minute about the real estate professional designation and what it means and the benefits from it. And what’s required to meet it.
01:40:35:08 – 01:41:05:24
Gian Piazza
Yeah. Yeah. So so when you’re a real estate professional under the tax code okay, which there’s a whole definition about that, you get to use you there’s a lot more flexibility with how you get to use depreciation deductions against your income. And so, if you’re not a real estate professional, let’s say you’re a software developer. And, you buy a rental property, normally you’re not you’re called a pass.
01:41:05:24 – 01:41:29:14
Gian Piazza
That’s called a passive, investor. And normally they’re not allowed to use the deductions from their their real estate against their income as an active income, as a software engineer. But when you meet this real estate professional status, you’re able to use, all the deductions from real estate against other income.
01:41:29:16 – 01:41:40:13
Rod Khleif
Yeah. But it’s it’s fantastic. It’s why Trump didn’t want to show his tax returns because he’s without question a real estate professional and doesn’t pay any tax like me. You know? Anyway. Yeah. Please continue.
01:41:40:16 – 01:41:43:01
Gian Piazza
Yeah. 100% right on with.
01:41:43:05 – 01:42:00:15
Rod Khleif
But it but it’s legal I mean the this is tax. This is all legal and and it’s there for a reason to stimulate, ownership, property ownership. So, so, you know, in Trump’s case, it’s not like he’s doing anything legal or hiding, but, Anyway, sorry I interrupted this one. Throw that in.
01:42:00:17 – 01:42:23:21
Gian Piazza
Yeah. And so, so, to meet that definition of a real estate professional, it’s not easy. You have to have at least 750 hours or more doing real estate activities, and it’s per year. Fine. Yeah, per year. And it’s defined. And they look at it pretty closely, and you can’t be spending more time in some other activity.
01:42:23:21 – 01:42:40:07
Gian Piazza
So in other words, if you’re a software engineer spending 2000 hours working for Microsoft, and you spend another 760 hours doing real estate, you still do not need a don’t get a definition of a real estate professional because you’re spending more time as a software.
01:42:40:07 – 01:42:49:25
Rod Khleif
So basically, it’s 62 hours a month. You’ve got a 62.5 hours a month. You’ve got to be spending in real estate with and not with a full time job. Something else. Got it. Okay.
01:42:49:25 – 01:43:20:04
Gian Piazza
Yeah. And so one of the strategies or or, you know, laws that people can take advantage of, is if one of the spouses is a real estate professional, if one of the spouses is managing properties and spending that time, and buying up properties, etc., and they file a joint tax return, that’s a situation where you can net everything together.
01:43:20:04 – 01:43:28:13
Gian Piazza
So, for example, that software engineer is married to now, their spouse and that spouse is a.
01:43:28:13 – 01:43:31:12
Rod Khleif
Real estate broker, real estate salesperson. Yeah.
01:43:31:15 – 01:43:48:02
Gian Piazza
Exactly. They’re buying up properties so they can do cost eggs on those properties, create all these paper losses, right. That there’s not enough income coming from those real estate properties, but they can use the losses now against the software engineers. Active income. Right.
01:43:48:02 – 01:44:07:27
Rod Khleif
Because even if yeah, even if that agent’s not doing very well in real estate, but they’re they’re doing it full time, you can have some incredible write offs if you’re buying real estate. Yeah. No I love it. That’s, that’s a, that’s a there’s a strategy right there. Love it. Okay. Now, one last question I’ve got for you, Jan, just because I’m, I’m, I don’t know the answer.
01:44:07:27 – 01:44:15:12
Rod Khleif
I’ve, I’ve heard that there are some loopholes regarding short term rentals from a tax standpoint. Can you elaborate on those?
01:44:15:15 – 01:44:45:15
Gian Piazza
Yeah. So with short term rentals, the they fall into a different category in the tax code. They say, the IRS looks at them more like, running a hotel. Right. And so a hotel, you’re supposed to depreciate over 39 years because it’s like a commercial activity and because it falls into that category, you don’t have to meet this real estate professional, criteria anymore of 750 hours.
01:44:45:19 – 01:45:15:27
Gian Piazza
Okay, instead, there’s this different test. It and it’s only, 100 hours of material participation to, to be considered active in that specific business. And so when he’s my software engineer, a software engineer now works for Microsoft 2000 hours, goes out and buys a short term rental property and is spending 100 hours or more a year managing that property.
01:45:15:29 – 01:45:24:04
Gian Piazza
That’s all they need. They can now use those those losses from cost segregation, these paper deductions against their active income.
01:45:24:04 – 01:45:46:25
Rod Khleif
Against their income. Wow, wow. Now let me ask you a question and just make this get a little nuance. Now, I know short term rentals are getting kind of kind of, they’re struggling a little bit right now. My brother’s got some cabins up in the Blue Ridge Mountains. He had to sell. One wasn’t doing great. But however, I’ve got students that are doing real, real well with mid term rentals where it’s like a month, two months, three months, six months to traveling nurses.
01:45:46:25 – 01:45:49:19
Rod Khleif
Do you know if those apply or is it have to be like a weekly thing?
01:45:49:19 – 01:45:57:01
Gian Piazza
Yeah. The definition of short term rental is is the average stay is to be 30 days or less 30 years. Okay, okay. Yeah.
01:45:57:05 – 01:46:17:00
Rod Khleif
Probably wouldn’t work then. Okay. Well, listen, Jan, I really appreciate you coming on. You added a lot of value in a very short amount of time, but, guys, I hope you appreciated this. I, sometimes this stuff makes my eyes cross, but, this is this is the reason 90% of the world’s millionaires either made it in real estate or invest enrolled their money in real estate because of these tax benefits.
01:46:17:00 – 01:46:23:09
Rod Khleif
And, and, so the name of your company, again is, Ccbc g what’s the website?
01:46:23:11 – 01:46:36:15
Gian Piazza
Yeah. So we have two websites. It’s kgw.com, but then there’s also one for our software platform called Cost segregation.com okay, okay. And we didn’t get a chance to talk. Yeah.
01:46:36:18 – 01:46:39:09
Rod Khleif
The domain name we did good with that one. Okay.
01:46:39:11 – 01:46:43:14
Gian Piazza
Yeah. Yeah. And I don’t know if we have any time that I could just tell you.
01:46:43:16 – 01:46:48:25
Rod Khleif
You know what? We didn’t talk about that. That’s right. Where they can go in and do it themselves. Yeah. Please, please talk about that. Sorry.
01:46:48:25 – 01:47:16:27
Gian Piazza
Yeah. Yeah, yeah. So cost segregation.com is our essentially sister software platform that we launched in 2016. And we did it specifically for smaller real estate investors with smaller buildings. Right. And so it allows you to go, you know, on the website and, and it’s a self-guided AI enabled software platform that allows you to get these studies done in under ten minutes.
01:47:17:00 – 01:47:28:21
Gian Piazza
It’ll suck in all the publicly available information. And it starts at 500 bucks, right. Wow. So we’re we’re just eliminating the humans that that are needed.
01:47:28:23 – 01:47:54:20
Rod Khleif
Usually that is cool. Wow. That’s awesome buddy. That is awesome guys. That’s a that’s a huge, huge, really beneficial tool to save money. If you’ve got a small real estate purchase, you know, maybe a, you know, single tenant small commercial thing or a houses or, you know, a duplex triplex, four plex, whatever I cost segregated, I think 8 to 10 houses once.
01:47:54:20 – 01:48:02:02
Rod Khleif
And, you know, of course I paid for it. Wow. That’s that’s fantastic. So so that’s the cost segregation.com where they can use that.
01:48:02:05 – 01:48:23:06
Gian Piazza
Yeah. That’s right, that’s right. I actually have a, a a discount code for your listeners for your podcast. And if they put in this, this discount code, they’ll get a 10% discount for first time users. It’s lifetime 2025 all caps.
01:48:23:09 – 01:48:41:18
Rod Khleif
Lifetime 2025 code. If you if you’re going to do a cost set guys there you go. Well I appreciate that. That’s nice. I didn’t know you did that. Well well awesome. Very interesting. Very, very educational. I appreciate you coming on, my friend. And, and, Yeah. Thank you.
01:48:41:21 – 01:48:43:06
Gian Piazza
Yeah. Thank you. Rod, this has been a pleasure.
