The Tax Strategy Most People Never Hear About—Until It Saves Them Thousands
By Paul Zoch, CFP®
With contributions from William Reese, Intern, Florida State University
Prosperitus Wealth Advisor
A successful executive recently purchased a luxury mountain cabin.
The property was intended to serve two purposes: a place to create family memories and a high-end vacation rental capable of producing income for years to come.
It also presented a potential tax opportunity the executive hadn’t necessarily considered when purchasing the property.
Cost segregation.
Working alongside our CPA professionals, we began evaluating whether components of the property could potentially qualify for accelerated depreciation—creating larger deductions earlier in the property’s ownership.
For the right property owner, the potential tax savings can be meaningful.
But what interested us wasn’t simply the deduction.
It was what could happen after the tax savings.
What If Tax Savings Became Investment Capital?
Residential rental property is generally depreciated over 27.5 years.
A cost segregation study takes a closer look at the property and may identify certain components—such as flooring, cabinetry, appliances, fixtures, landscaping, driveways, fencing, exterior lighting, and other qualifying improvements—that may be depreciated over shorter periods.
That can potentially accelerate deductions and reduce taxable income earlier.
But suppose the strategy creates meaningful tax savings.
What happens to that money?
It could be spent.
Or it could potentially be redirected toward:
Retirement savings
Additional investments
Cash reserves
Debt reduction
Property improvements
Another income-producing asset
That’s where a tax strategy can become something much bigger.
Tax savings can create additional capital. And capital, invested intentionally, has the potential to create future wealth and retirement income.
The cabin was the investment.
The tax opportunity was hiding inside it.
The Most Important Question Isn’t “Can We Do It?”
It’s:
“Should we?”
Cost segregation isn’t appropriate for everyone.
Passive activity loss rules can affect whether deductions can be used immediately. Accelerated depreciation can also have future tax consequences, including potential depreciation recapture when a property is sold. The cost of the study itself also needs to be weighed against the potential benefit.
That’s why the strategy shouldn’t be evaluated in isolation.
Does it make sense given the client’s income?
Can the deductions actually be used?
How long will the property likely be owned?
What could the future tax consequences be?
And if the strategy produces additional cash flow today, how can those dollars best support the client’s long-term financial plan?
Those questions turn a tax idea into financial planning.
This Is Where a Personal CFO Adds Value
The executive in this example is already successful.
They know how to make decisions. What they don’t have is unlimited time.
Like many executives and business owners, their attention is focused on running a company, managing people, pursuing growth, and building the business forward.
Meanwhile, their personal financial life continues to become more complex.
Investments. Taxes. Real estate. Retirement. Estate planning. Insurance. Business interests. Family goals.
That’s why we believe a wealth advisor can be most valuable as a quiet partner in the background.
Through our Personal CFO approach, we look across investments, taxes, retirement, cash flow, real estate, estate considerations, and other areas of a client’s financial life—while coordinating with CPAs, attorneys, and other professionals when appropriate.
The goal isn’t to make financial planning louder or more complicated.
It’s to notice opportunities the client may not have the time to look for.
In this case, that meant looking at a mountain cabin and asking a question beyond whether it was a good investment:
“Is there a tax opportunity here that could help improve the client’s broader financial plan?”
That one question opened a much larger conversation.
The Opportunities Aren’t Always Obvious
Today, it may be cost segregation.
Tomorrow, it could be a Roth conversion, charitable giving strategy, business succession decision, estate-planning opportunity, retirement-income strategy, or another tax-planning idea.
The strategy changes.
The value is in having someone consistently looking around corners and connecting the dots.
For busy executives, that’s what a Personal CFO relationship should feel like.
They continue running the company, building the business, and making the decisions that move it forward.
Meanwhile, a quiet financial partner is working in the background—paying attention to their personal financial world, looking for opportunities, coordinating the right professionals, and helping bring important decisions forward with greater clarity.
The executive remains the decision-maker.
The Personal CFO helps make sure they are better prepared when those decisions need to be made.
Because sometimes the most valuable financial strategy isn’t the one a client was looking for.
It’s the one they didn’t know to ask about.
About the Contributors
Paul Zoch, CFP® is a Wealth Advisor with Prosperitus Wealth. Through a Personal CFO approach, Paul helps executives, business owners, and families coordinate investment management, retirement planning, proactive tax planning, cash flow, and other areas of their financial lives while collaborating with tax, legal, and other professionals.
William Reese is an intern with Prosperitus Wealth and a student at Florida State University. He contributed to the research and development of this article.
This article is for educational purposes only and should not be considered tax or legal advice. Every client’s situation is unique. Please consult with the appropriate tax, legal, and financial professionals before implementing any strategy.
