A Cost Segregation Study is a tax savings tool that allows previously classified assets subject to 39-year depreciable life for a commercial building and 27.5-year for a residential building to reduce current income tax liabilities by accelerating depreciation deductions for qualifying components. The study identifies assets within a building that can be reclassified into a much shorter depreciation recovery period.
“Cost Segregation is a lucrative tax strategy that should be used in almost every major purchase of commercial real estate” – The Wall Street Journal
Benefits of a Cost Segregation Study
- Generates immediate increase in cash flow through accelerated depreciation deductions
- Reduces income taxes and can also reduce real estate property taxes.
- Provides an easy opportunity to claim ‘catch up’ depreciation on previously misclassified assets.
- Provides an independent third-party analysis that will withstand IRS review
- Property owners with a current year tax liability
- New construction
- Purchase of existing property
- Renovations or expansion
- Leasehold improvements
- Existing property placed in service after 1986 (“look-backs”)
- Real property stepped-up through estate
- Over $500,000