Top Tax-Saving Tips for Laundromat Owners: How to Use Cost Segregation to Boost Your Bottom Line
If you own a laundromat or are planning to buy one, understanding the ins and outs of cost segregation could mean dramatic savings on your tax bill—money you can put back into growing your business. Episode 235 of the Laundromat Resource Podcast dives deep into this topic with actionable advice that’s too valuable to miss. Here are the top tips, each with practical applications to help you make the most of your laundromat investment.
1. Understand What Cost Segregation Is—and Why It Matters
What It Is:
Cost segregation is a tax strategy where components of your laundromat property are categorized to depreciate some assets faster than the typical straight-line method.
How to Apply It:
Instead of depreciating your entire building over 39 years, you can separate out things like flooring, electrical systems, and the laundromat equipment (washers, dryers, etc.), which can often be depreciated over just 5 to 15 years. This means you take larger depreciation deductions in the early years of ownership—translating to big tax savings now, not decades later.
Practical Step:
When you purchase a laundromat or upgrade equipment, consult a cost segregation specialist to review your property or planned purchases. They’ll identify which components qualify for accelerated depreciation so you can maximize your upfront deductions.
2. Leverage “Bonus Depreciation” for Massive First-Year Deductions
What It Is:
Current tax law allows up to 100% “bonus depreciation” on qualifying assets, so the entire depreciable value of these items can be written off in your first year.
How to Apply It:
If you’re buying a laundromat with real estate, this can mean writing off 30–40% of your purchase price (excluding land) right after acquisition. For many, this results in tens of thousands—or even hundreds of thousands—of dollars of immediate tax savings.
Practical Step:
Plan acquisitions or major renovations to take place while these bonus depreciation provisions are in effect. Check with your advisor on deadlines—just going under contract before a cutoff date can lock in major savings.
3. Know Your “Depreciable Basis”—and How to Calculate It
What It Is:
Your depreciable basis is the building and any improvements (excluding land). The IRS doesn’t allow you to depreciate land or intangible assets like goodwill.
How to Apply It:
When acquiring a property, break out the land value as low as possible (using appraisals or local tax assessment figures) to maximize your depreciable basis. Also, document all capital expenditures (renovations, new machines, parking lot upgrades) before placing the laundromat in service; these costs can be added to your depreciable basis.
Practical Step:
At purchase, negotiate the allocation between real estate, equipment, and intangible assets. Save all receipts for upgrades and keep your CPA involved to ensure everything eligible gets depreciated.
4. Use Professional Help—Not DIY—For Maximum Savings
What It Is:
A detailed engineering-based cost segregation study, performed by specialists, is far more effective than using generic estimates or spreadsheets.
How to Apply It:
While it’s possible to DIY a cost seg study, the experts will spot assets that you’d likely miss—including site improvements like parking lots, landscaping, and specialty electrical systems. The ROI on a professional study can be 20 to 25 times its cost for typical laundromats and commercial properties.
Practical Step:
If you’re spending $200,000 or more on a property or upgrade, seek a qualified provider (not just your regular accountant). Choose firms that stand by their work, particularly in the rare case of an IRS audit.
5. It’s Not Just for Big Investors—Even One-Store Owners Benefit
What It Is:
Cost segregation is often marketed to big real estate owners, but even single-location laundromat owners can benefit—especially when real estate is part of the deal, or you’ve done substantial equipment or site upgrades.
How to Apply It:
A new owner often faces unexpected costs and high taxes. Cost segregation can counterbalance those early “surprise” expenses with large first-year deductions, cushioning your cash flow.
Practical Step:
Run the numbers: Ask for a free estimate from a cost segregation firm before you close or shortly after purchasing your laundromat. Even if your investment is modest, the savings can be meaningful.
6. Real Estate Professional Status: An Overlooked Goldmine
What It Is:
If you (or your spouse) can qualify as a “real estate professional” under IRS rules, you can use depreciation losses to offset W2 and other active income—not just rental income.
How to Apply It:
If this is possible in your situation, you can legally “zero out” (or at least slash) even a high W-2 income. This is especially valuable if you’re building a laundromat portfolio or have a spouse managing the real estate side.
Practical Step:
Document your hours and involvement—get advice from a specialized CPA. Even if you don’t qualify, ask if your spouse can, which may dramatically amplify your tax savings.
7. Didn’t Use Cost Seg in Year One? It’s Not Too Late
What It Is:
You can do a “change of accounting method” retroactively. Even if you bought your laundromat a year or two (or more) ago, a cost segregation study can still recalibrate your depreciation, recouping missed savings.
How to Apply It:
Order a study for your previously purchased properties. The new depreciation schedule can still create immediate tax benefits going forward.
Practical Step:
Contact a cost segregation pro about “catch-up” depreciation for existing laundromats. This gives you a boost, even years after your initial purchase.
8. Choose the Right CPA—Not Just Your Family’s Tax Preparer
What It Is:
Not all CPAs are created equal. Many aren’t up to speed on cost segregation and may discourage aggressive (but legal) strategies.
How to Apply It:
If your tax pro discourages legitimate deductions because “it could trigger an audit,” it’s time for a switch. You want an advisor who welcomes your questions, supports your growth, and stands by your return if you’re audited.
Practical Step:
Ask candidates about their experience with cost segregation, bonus depreciation, and tax planning for laundromats. Pick a CPA skilled in real estate and business tax strategies.
Conclusion: Make Cost Segregation Part of Your Investment Game Plan
If you want to buy a laundromat or already own one, don’t leave five- or even six-figure tax savings on the table. Use these tips from the latest Laundromat Resource podcast to make cost segregation part of your annual strategy. It’s not about “hacks”—it’s about smart, legal moves that let you reinvest in your business, buy more locations, and build lasting wealth.
Ready to take action?
Consult a cost segregation expert before your next big purchase or renovation.
Bring your questions to group Q&A sessions like those hosted by Laundromat Resource.
Audit your tax preparer and ensure you have the right pro on your team.
By fully leveraging cost segregation, you’ll keep more of your hard-earned money and grow your laundromat business faster.
Need more info?
Check out the full episode of the Laundromat Resource Podcast for real-world examples, or reach out to tax pros featured in the show for a personalized assessment!
