Cost Segregation Overview

Engineering based cost segregation studies permit commercial real estate owners to reclassify real property for depreciation purposes and reclassify it as more rapidly depreciating personal property. This reclassification results in significant cash flow benefits in both present and future years through considerably shorter depreciable tax life and accelerated depreciation methods.

History of the Program

Cost Segregation has evolved from similar processes used in the 1970s and 1980s to complete investment tax credit studies. Investment Tax Credit (ITC) – When this credit was repealed in 1986, most assumed cost segregation studies provided no further benefit under the new tax law. However, in 1997 a landmark tax court case, Hospital Corporation of America succeed in defending the application of engineering-based cost segregation as a viable method to differentiate real and personal property under existing law.

In 2004 the IRS released the Audit & Technique Guideline, making clear the expected process of performing a successful Cost Segregation Study. This opened the doors for many small and midsize companies to begin taking advantage of what was previously only pursued by larger companies.

What are the Benefits of a Cost Segregation Study?

According to the U.S. Treasury Department, “Cost Segregation Studies are a lucrative tax strategy that should be considered in almost every real estate purchase.”

An average Cost Segregation Study offers approximately $150,000 in additional depreciation per $1 million dollars in purchase or construction cost over the normal 39 year straight line method.

“Cost Segregation Studies are a lucrative tax strategy that should be considered in almost every real estate purchase.” -U.S. Treasury

Getting Started

An initial consultation along with a feasibility report is conducted to determine the cash flow and net present value (NPV) benefits. The consultation allows our professionals to evaluate your current tax status and your future business plans along with your CPA to determine if a study would be of benefit.

The initial consultation is a simple and quick process. To schedule your consultation, please contact us.