The Depreciation Guide for Passive Investors
How depreciation actually works in a real estate syndication, what it does for a limited partner, and the limit most investors are never told about. Nine pages, real numbers from a real deal, and no email required.
Start with the limit, not the benefit
A passive investor in an apartment syndication can receive a first year depreciation loss worth most of the capital they invested. That number is real, and on its own it is misleading.
Passive losses offset passive income. They do not offset wages or practice income, absent real estate professional status or the short term rental exception, and most high earning professionals meet neither. If you have no passive income yet, the deduction is not lost. It waits.
Every firm in this business will tell you about the deduction. This guide explains who can actually use it.
What is inside
- What depreciation is, and what a cost segregation study changes
- Bonus depreciation after the 2025 law change, and the acquisition date that decides eligibility
- A real deal worked end to end: a 112 unit community in San Antonio, purchased for $11,250,000
- What that produced for a $100,000 investor, and why the figure is a model rather than a promise
- Three investors with identical K-1s and three different outcomes
- What happens to losses you cannot use this year, and the three ways they come back
- The exit, and why this is a timing strategy rather than an erasure
- The three exceptions to the passive rules, and whether they apply to you
- Nine questions to ask a sponsor before you wire
Prefer to watch?
We sat down with Brian Bigham, VP at Madison SPECS, the firm that ran the cost segregation study on the deal in this guide. He explains the mechanics, what bonus depreciation covers after the 2025 law change, and where the deduction stops. Watch the interview, 27 minutes with chapters. There is also a 7 minute walkthrough of the deal itself, with the cost segregation model on screen.
Who it is for
Physicians, dentists, attorneys, executives and business owners who are already investing passively, or are evaluating their first offering, and want the accurate version of the tax story before they commit capital.
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For educational purposes only. Not tax, legal or investment advice. Figures from the Winston Apartments cost segregation model are illustrative, prepared before the property’s first tax filing, and are not a projection of returns. Past and projected performance do not guarantee results. Nothing here is an offer to sell or a solicitation to buy any security.