I hope you have some takeaways from this blog. if you want our team to provide you tenant placement or property management. Click Here
Author: Mark Ainely | Partner GC Realty & Development & Co-Host Straight Up Chicago Investor Podcast

When you’re investing in Chicago real estate, whether you’re flipping bungalows in Ravenswood Manor or holding onto a multi-unit in Portage Park, you’re always looking for ways to reduce your tax burden and free up cash for your next deal. One of the most overlooked tools for doing that is cost segregation.

In this episode of the Straight Up Chicago Investor Podcast, “Cost Seg Kev” (Kevin Cawley) breaks down what cost segregation is, how it works, and, most importantly, how Chicago rehabbers, landlords, and property managers can use it to save tens of thousands of dollars. From IRS rule changes in 2025 to surprising ways drywall tape can accelerate depreciation, Kev walks us through the strategies that have saved his clients millions.

Whether you own two-flats, short-term rentals, or large commercial properties, this is a must-listen for anyone serious about maximizing cash flow while staying compliant with tax law.

🎥 Watch the full episode here: https://youtu.be/

Questions We Answer in This Episode

Q: For those unfamiliar, what is cost segregation and why should Chicago investors care?
A: Cost segregation is a tax strategy that breaks a building into components with shorter depreciable lives, like flooring, cabinets, and sidewalks, so you can write them off faster. Instead of depreciating your entire building over 27.5 years (residential) or 39 years (commercial), you move certain parts into 5, 7, or 15-year schedules. This accelerates deductions and puts cash back in your pocket now, rather than decades later.

Q: Who benefits most from cost segregation?
A: Real estate professionals get the biggest advantage because they can use accelerated depreciation to offset active income, like flips or commissions. But high-earning W2 employees can benefit through short-term rental ownership, which requires only 100 hours of active management per year to qualify.

Q: How have IRS rules changed for 2025?
A: Properties purchased and placed in service after January 19, 2025 are back to 100% bonus depreciation for assets with a life of 20 years or less. Properties purchased earlier in 2025 still get bonus depreciation, but at the reduced 40% phase-out rate.

Q: Does it matter if you buy a property turnkey versus rehabbing it yourself?
A: The benefits are similar, what matters most is your basis (purchase price plus improvements). Whether you bought it brand new or remodeled it, the components have the same depreciable lives.

Q: What about small properties, when is it too small to make sense?
A: Kev’s firm has done cost segs on buildings with bases as low as $150,000. As long as the tax savings significantly outweigh the study cost (often 5–10x), it’s worth considering.

Q: Can you do cost segregation years after buying a property?
A: Yes. Even if you’ve owned the building for 5, 10, or 20 years, you can do a “look-back” study and claim missed depreciation without amending past returns.

Q: What’s the deal with IRS-approved drywall tape?
A: GreenZip drywall tape, approved by the IRS since 2008, allows non-load-bearing walls to qualify as 5-year property, dramatically increasing the portion of a building eligible for accelerated depreciation. Major companies like CBRE, Bank of America, and Turner Construction have used it.

Q: How does networking play into Kev’s success?
A: Rather than chasing individual building owners, Kev focuses on their trusted advisors, CPAs, attorneys, and lenders, who can refer multiple clients. He invests in relationships through lunches, golf, and building genuine connections.

Show Notes

00:00 Straight-line depreciation vs. accelerated depreciation explained
05:05 Residential vs. commercial depreciation timelines for tax purposes
07:12 Breaking down a $1.2M four-unit example
08:49 IRS origins of cost segregation in the late ’90s
10:58 Time value of money and strategic timing for cost seg studies
12:30 Real estate professional qualification and benefits
15:19 Short-term rental loophole for W2 earners
17:46 Recapture rules and “defer, defer, defer, die” wealth strategy
23:15 Depreciation resets for new owners after a sale
25:04 Bonus depreciation phase-out and January 19, 2025 rule change
28:20 Cost seg on older properties and post-purchase look-back studies
30:23 Rehab vs. turnkey purchases and similar benefits
31:18 Phase one/phase two studies for ongoing rehabs
32:19 Cost seg value on smaller properties
34:04 Kev’s free online cost seg calculator tool
35:30 IRS-approved drywall tape and its tax benefits
40:23 Why Kev answers his own phone and works directly with investors
42:56 Networking through trusted advisors instead of cold-calling owners
44:58 Partnering with experienced investors for your first deal
45:11 Kev’s hobbies: guitar, piano, and golf
45:45 Recommended book: At Your Command by Neville Goddard
46:28 Shoutout to CPA James Mayan as a valuable resource for investors
47:27 How to connect with Kev and bring him new strategies

Takeaways for Chicago Property Managers and Landlords

Know your depreciation options. Straight-line is automatic, but cost segregation can accelerate deductions and improve cash flow.
IRS bonus depreciation is back to 100% for qualifying properties purchased after January 19, 2025, timing matters.
Real estate professionals reap the biggest rewards by offsetting active income, but short-term rentals create a unique opportunity for high-earning W2 owners.
Small buildings can still benefit. Don’t assume cost seg is only for million-dollar-plus properties.
Look-back studies can unlock missed deductions even years after purchase.
Networking with trusted advisors can open more doors than chasing deals directly.
IRS-approved drywall tape can turn long-life assets into 5-year property, multiplying your savings.
Plan ahead for recapture, know your exit strategy before you take accelerated depreciation.

Guest Info

Guest Name: Kevin Cawley (“Cost Seg Kev”)
Company: Cost Segregation Services, Inc.
Website: costsegkev.com
Cell: 773-931-6498

Because finding good tenants and property management shouldn’t feel like online dating.

Dear Investor,

If you are an investor in either the city or suburbs of Chicago, I would love to speak with you about how we can help you on your real estate journey. At GC Realty & Development LLC, we help hundreds of Chicagoland real estate owners and brokers each year manage their assets with both full service property management and tenant placement services.

We understand that every investor’s goals are unique, and we love learning about each client’s individual needs. If there is an opportunity to help you buy back your time by managing your rental property or finding quality tenants, please check us out.

Best Investing,