COST SEGREGATION
STUDIES
Background
Cost segregation is a tax strategy that accelerates depreciation deductions for real estate assets to reduce income taxes. Business owners and individuals who have purchased, constructed, expanded or remodeled real estate can utilize this valuable planning tool to increase cash flow to reinvest in their business or purchase additional property.
The Benefits
Accelerating the depreciation period for your investment frees up capital to reinvest in your company and position it for success, now and in the future.
Reduces income tax
and increases cash flow
Increases sales tax exemptions
Helps reclaim past depreciation deductions
Lowers property taxes
Provides tax savings in the first year
Forms the basis of the property records system
FREQUENTLY ASKED QUESTIONS
Your property as it stands is viewed as one single asset and depreciation is taken over 39 years for commercial property and 27.5 for residential. Our engineers thoroughly analyze the internal and external components of the property, available cost data and records to create a detailed report that properly recategorizes the assets as either personal property, land improvements, buildings and structures, or land. Each of these asset categories depreciates at a different rate.
Next, our tax specialists identify those components that depreciate faster. Thanks to current tax legislation, these shorter-lived components are eligible for Bonus Depreciation for a limited time. Often 30% or more of your original purchase price or construction cost can be deducted immediately.
Most commercial or income-producing properties can benefit from a cost segregation study, including: (1) Office buildings, (2) Retail stores, (3) Hotels and motels, (4) Warehouses, (5) Manufacturing facilities, (6) Restaurants, (7) Apartment buildings, (8) Hospitals and medical offices, (9) Data centers, and (10) Sports facilities.
There is no hard and fast rule for how often a cost segregation study should be conducted, as it depends on a variety of factors such as the type of property, the extent of renovations or improvements, and changes in tax laws. However, as a general rule, it is recommended that property owners consider a cost segregation study whenever they acquire or construct a new property, or when they make significant renovations or improvements to an existing property. This is because the cost segregation study can help the property owner identify assets that can be reclassified for accelerated depreciation, resulting in significant tax savings.