Florida’s real estate market is hotter than ever, with its vibrant mix of residential rentals, commercial properties, and unique coastal assets drawing investors from across the country. But investors should keep in mind that beyond the initial purchase, there are tax strategies that can seriously elevate their investment. Cost segregation is one such strategy that can be pivotal for Florida property owners, allowing them to accelerate depreciation, boost cash flow, and maximize tax savings.
At Veritax Advisors, LLC, we’ve seen firsthand how this strategy transforms the financial outlook for property owners across the Sunshine State. In this blog, we will explore the potential for cost segregation in Florida, based on real-world examples from our 2025 reports.
Why Cost Segregation Matters in Florida
Cost segregation is an IRS-approved tax strategy that reclassifies components of a property from longer depreciation periods (typically 27.5 or 39 years) to shorter ones (5 or 15 years). By accelerating depreciation deductions, property owners can significantly reduce their taxable income in the early years of ownership, freeing up cash for reinvestment, property improvements, or other financial goals.
Florida’s unique real estate landscape, spanning short-term vacation rentals in Key Largo, multi-family residences in Miami, and self-storage facilities in Pensacola, makes cost segregation particularly impactful. The state’s properties often include high-value components like specialized fixtures, landscaping, swimming pools and other site improvements that qualify for shorter depreciation schedules. With our engineering-based approach, Veritax Advisors has helped Florida property owners discover substantial tax savings by identifying these components.
Outlined below are three specific examples from our 2025 cost segregation studies to illustrate the potential.
Real-World Case Studies from Florida Properties
- Short-Term Rental in Key Largo: North Drive
- Property Details: A 3,083-square-foot short-term rental property purchased in January 2022, featuring amenities like a pool, boat jetty, and automated driveway gates.
- Cost Segregation Results: Our study reclassified 42.91% of the $1,525,000 cost basis into shorter depreciation periods:
- 15.17% ($231,354.97) as 5-year property, including items like furnishings, equipment, and certain electrical components.
- 27.74% ($423,014.06) as 15-year, covering site improvements like brick pavers, fencing, and the boat lift.
- 57.09% ($870,630.97) remained as 27.5-year residential rental property.
- Why It Matters: By reclassifying over 42% of the property’s cost basis into 5- and 15-year categories, the owners can front-load depreciation deductions, significantly reducing taxable income in the early years. For a vacation rental in a high-demand market like Key Largo, this cash flow boost can fund upgrades to stay competitive in the short-term rental market.
- Multi-Family Residence in Miami: West Flagler Street
- Property Details: A 19,774-square-foot multi-family residence purchased in February 2025, with modern finishes and site improvements like concrete and asphalt pavement.
- Cost Segregation Results: Our analysis reclassified 23.71% of the $4,480,000 cost basis into shorter depreciation periods:
- 23.47% ($1,051,524.77) as 5-year property, including electrical systems, plumbing fixtures, and furnishings for one- and two-bedroom units.
- 0.24% ($10,725.48) as 15-year property, covering site exterior improvements like concrete pavement.
- 76.29% ($3,417,749.75) remained as 27.5-year residential rental property.
- Why It Matters: Miami’s multi-family market is booming, and reclassifying nearly a quarter of the property’s cost basis into 5-year property allows the owners to accelerate deductions on high-value interior components. This strategy is ideal for large-scale residential properties where tenant turnover and maintenance costs are high, providing immediate tax relief to offset operational expenses.
- Self-Storage Facility in Pensacola: Lillian Highway
- Property Details: An 11,850-square-foot self-storage facility purchased in September 2024, featuring metal construction and site improvements like asphalt pavement, security systems and fencing.
- Cost Segregation Results: Our study reclassified 32.21% of the $325,000 cost basis into shorter depreciation periods:
- 12.26% ($39,844.27) as 5-year, including electrical systems and specialties like security equipment.
- 19.95% ($64,826.50) as 15-year property, covering asphalt pavement, bollards, and fencing.
- 67.79% ($220,329.23) remained as 39-year non-residential real property.
- Why It Matters: Self-storage facilities are a growing asset class in Florida, and the significant allocation to 15-year land improvements reflects the value of site enhancements critical to their operation. The tax savings from accelerated depreciation can help owners expand or upgrade facilities to meet rising demand.
Why Florida Is a Hotspot for Cost Segregation
Florida’s diverse property types—from coastal vacation homes to urban multi-family complexes and commercial storage facilities—make it a prime candidate for cost segregation. The state’s warm climate and tourism-driven economy often lead to properties with specialized features like pools, boat docks, and specialized HVAC systems, which frequently qualify as 5- or 15-year property. Additionally, Florida’s high property values amplify the dollar impact of reclassifying even a small percentage of the cost basis, resulting in substantial tax savings.
For example:
- Vacation Rentals: Properties like the Key Largo rental benefit from reclassifying amenities like pools and boat lifts, which are common in Florida’s coastal markets.
- Multi-Family Properties: Miami’s urban rentals, with their extensive interior finishes and electrical systems, offer significant 5-year property allocations, as seen in the West Flagler Street study.
- Commercial Properties: Self-storage facilities, like the one in Pensacola, capitalize on land improvements like paving and fencing, which are critical to their functionality and qualify for 15-year depreciation.
The Veritax Advantage
At Veritax Advisors, we use an engineering-based approach, backed by IRS guidelines and court precedents, to ensure our cost segregation studies are audit-defensible. Our 2025 Florida reports demonstrate how we meticulously analyze property components, from furnishings to site improvements, to maximize your tax benefits. By leveraging tools like RS Means cost estimating and conducting thorough site inspections, we identify every opportunity to accelerate depreciation, tailored to the unique characteristics of your Florida property.
Take Action Today
Whether you own a vacation rental in Key Largo, a multi-family complex in Miami, or a self-storage facility in Pensacola, cost segregation can unlock significant tax savings to fuel your investment strategy. The examples above show reclassification rates of 23.71% to 42.91% of the cost basis, translating into thousands—or even millions—of dollars in accelerated deductions. Don’t leave money on the table in Florida’s dynamic real estate market.
Ready to explore cost segregation for your property? Contact Veritax Advisors, LLC today to schedule a consultation and discover how we can help you maximize your tax savings. Visit our website at https://www.veritaxadvisors.com or reach out to our team to get started. Let’s make your Florida investment work harder for you!