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- COST SEGREGATION
- Cost Segregation
A strategic tax planning tool that accelerates depreciation deductions on real
estate, often resulting in significant tax savings.
A strategic tax planning tool that accelerates depreciation deductions on real estate, often resulting in significant tax savings.
- Overview
A Cost Segregation study is a strategic tax planning tool widely used by real estate investors and property owners to accelerate depreciation deductions on their federal tax returns. The accelerated depreciation deductions can result in significant tax savings. Typically, properties are depreciated over 27.5 or 39 years for federal tax purposes when acquired, constructed, or renovated. However, certain assets included in the cost of the building shouldn’t be depreciated over that long a life. Cost segregation studies fix this by properly reclassifying property into 5, 7, or 15-year lives.
Cost segregation studies completed for clients
nationwide
Accelerate Tax Depreciation Deductions
Create immediate tax savings by increasing depreciation deductions early in the asset’s life.
Tax Savings
Lowering taxable income via depreciation increases cash flow by reducing tax liabilities.
Increased Cash Flow
Lower tax liabilities allow property owners to grow their business by reinvesting the savings.
Future Opportunities for Savings
As assets are removed from service later, cost segregation studies make future partial asset dispositions and write-offs easier to claim.
- Commercial, industrial, or residential rental properties
- Owner-occupied commercial or business properties
- Section 754 and 743(b) step-up-in-basis transactions
- Properties with a basis of more than $350,000
- Properties placed in service after 1986
- Companies with a significant amount of fixed assets
- Recent Results
Retail building
Ambridge, PA
Purchase Price
$2,838,250
Reclassified
25%
We also found the client had installed a new TPO membrane roof on another property. Their CPA had planned to capitalize the $250K repair, but our review determined it was eligible to be expensed instead, adding another $92.5K in tax savings.
$244,366
in first-year tax savings
Multifamily property (syndication)
Greenwood, IN
Purchase Price
$66,000,000
Reclassified
21%
We also found the client had installed a new TPO membrane roof on another property. Their CPA had planned to capitalize the $250K repair, but our review determined it was eligible to be expensed instead, adding another $92.5K in tax savings.
$4,669,075
in first-year tax savings
View 5 more case studies
Three mobile home parks (syndication)
Purchase Price
$18,100,000
Reclassified
68%
We also found the client had installed a new TPO membrane roof on another property. Their CPA had planned to capitalize the $250K repair, but our review determined it was eligible to be expensed instead, adding another $92.5K in tax savings.
$3,955,446
in first-year tax savings
Multifamily & mixed-use development, 2 phases
Construction Cost
$40,045,142
Reclassified
29%
This project was under construction while new bonus depreciation legislation was rolling out. Without a proper study, the client would have been stuck at 40% bonus depreciation. Our team identified assets eligible for 100% bonus depreciation, increasing the benefit, and walked the client through the correct election and supporting statements for the return.
$2,848,397
in first-year tax savings
Plastics manufacturing plant, new construction
Construction Cost
$13,200,000
Reclassified
25%
$1,086,546
in first-year tax savings
Self-storage facility, new construction
Construction Cost
$10,587,950
Reclassified
24%
$674,916
in first-year tax savings
Assisted living & independent living addition
Construction Cost
$12,683,902
Reclassified
34%
$709,897
in first-year tax savings
- Explore Other Services
Cost Segregation
R&D Tax Credit
179D Energy Efficiency
- FAQs
Answers to some of our most common questions
The government and IRS allow property owners to take a deduction for the wear and tear of their business property. The default method to depreciate a building is over 27 and a half years for residential properties or 39 years for commercial properties and short-term rentals. But not everything at the property should be depreciated over such a long depreciable life. Things like carpeting, specialty electrical work, parking lots, and certain fixtures can legally be reclassified into much shorter recovery periods such as five, seven, or fifteen years.
The process of identifying, valuing, and properly classifying the assets is called a cost segregation study. The result is that instead of spreading your deductions evenly over decades, you take a much larger deduction earlier in the asset’s life. When completed correctly, it results in immediate increased cash flow and tax savings that can be reinvested.
Fees vary with the size and complexity of the property, but the number that matters is return on investment: tax savings are typically many times larger than the fee. We start every engagement with a free feasibility review, so you see the expected savings and the exact cost side by side before committing to anything.
Most studies take 4 to 6 weeks from kickoff to a final, delivered report; larger or more complex properties can take longer. You’ll have a direct line to the person doing the work throughout, not a rotating cast of contacts.
No. Cost segregation is a well-established, IRS-recognized method used by property owners nationwide every year. What matters is documentation quality, the IRS has published its own audit techniques guide, and we build every study to that standard.
Curious if Cost Segregation applies to you?
A short conversation tells us fast, and it’s free either way.