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What is a Cost Segregation Study?
Simply put, a cost segregation study identifies building assets which can be depreciated at an accelerated rate using shorter depreciable lives. These assets may be part of newly constructed buildings or existing buildings that have been purchased or renovated. Faster depreciation translates into significant tax savings.
How Does a Cost Segregation Study Benefit You?
Most taxpayers depreciate real property over 39 years. However, using cost segregation, our engineering staff will reallocate appropriate assets by five-, seven-, or fifteen-year lives. Several types of construction property can qualify for faster depreciation - landscaping and paving, floor coverings, cabinetry, specialty electrical and HVAC equipment, and much more.
The benefits to you include -
- Maximizing your annual depreciation expense
- Reducing your income tax costs
- Improving your cash flow
Who Needs a Cost Segregation Study?
Almost every business can benefit from a cost segregation study. If you have recently acquired or constructed a facility or have installed leasehold improvements, you can realize current tax savings. Even if the expense of the construction, purchase or renovation was in prior years, a cost segregation study can benefit you. Favorable IRS rulings allow you to complete a cost segregation study on a past acquisition or improvement. You can then take a current-year deduction for the newly accelerated depreciation not claimed in the past.
Our cost segregation studies have saved our clients tax dollars on -
- Office buildings
- Retail stores and shopping centers
- Manufacturing plants
- Distribution warehouses
- Auto dealerships
- R & D facilities
- Restaurants
- Medical facilities
- Data centers
- Apartment complexes
- High-tech facilities
- Banks
The process is straightforward and includes -
- A comprehensive review by our engineering staff of your construction invoices and building plans to maximize the allocation of five-, seven-, and fifteen-year assets.
- An on-site inspection of the building to accumulate additional facts in support of the study - including photos of the exterior and interior of your building.
- Appropriate allocation of all indirect, "soft" construction costs, which are easily overlooked.
- A written report supporting our findings and cost allocations - including a detailed listing of various assets reclassified to shorter depreciable lives.
Is the Cost of the Study Worth the Savings?
Based on our wealth of experience, we can provide an accurate, upfront estimate of the net present value (NPV) of the tax savings from conducting a study. Generally, the NPV is ten to twenty times our fees, but this will vary by property. Our cost segregation professionals will evaluate your project and provide an honest assessment of whether or not a study is worthwhile before any fees are charged.
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