What Is Cost Segregation?
Cost Segregation is the technical process of identifying Personal Property assets and Land Improvements that are grouped with real property assets for the purpose of “carving out” this valuable property for tax reporting purposes under the guidelines of the Federal Tax Codes.
A well-prepared Cost Segregation Study will reclassify these Personal Property assets and Land Improvements to shorten their depreciation time of which then reduces the Owners current income tax obligations. Reducing tax lives results in accelerated depreciation deductions thereby creating a reduced tax liability of which yields an increase of cash flow.
Personal Property assets include a building’s non-structural elements that are affixed to the building but do not relate to the overall operation and/or maintenance of the building.
Land Improvements generally include items located on the exterior of the building footprint that are also affixed to the land but do not relate to the overall operation and/or maintenance of the building.
Since 1993, all commercial property within the United States is being depreciated on a 39-year basis. So if you do NOT have any need for any type of tax deductions, then a Cost Segregation Study might not be for you.
However, if you would like to see if your commercial property or residential apartment complex might qualify for these significant tax deductions, then let us examine a few documents that we need to review in order to assess the potential benefits that can be garnered from our study.