Cost Segregation (Cost Seg)
What is Cost Segregation (Cost Seg)
Engineering-based cost segregation studies enable commercial real estate owners to restructure real property for depreciation purposes, categorizing it as rapidly depreciating personal property. This restructuring leads to substantial cash flow benefits in both present and future years by shortening the depreciable tax life and implementing accelerated depreciation methods.
What are the Benefits of a Cost Segregation Study?
An average Cost Segregation Study reveals the potential for around $150,000 in additional depreciation for every $1 million in purchase or construction cost compared to the standard 39-year straight-line method.
Average reclassification percentage recaptured with 5,7, and 15-year property with an Engineering-Ba
- Apartment Building (20-40%)
- Assisted Living Facility (22-45%)
- Auto-Car Dealership (29-35%)
- Bank (30-45%)
- Conference Center (25-35%)
- Fitness Center (22-45%)
- Golf Course (28-60%)
- Grocery Store (20-45%)
- Hospital (28-40%)
- Hotels (20-40%)
- Leasehold Improvements (20-80%)
- Manufacturing (20-40%)
- Medical Office/Clinic (22-35%)
- Mixed Use (20-40%)
- Office Building (20-30%)
- Research Facility (22-45%)
- Resort (25-45%)
- Restaurant (20-80%)
- Retail Strip Mall (18-40%)
- Theme Park (16-22%)
- Warehouse (20-30%)
- Winery (18-45%)
History of the Program
The practice of Cost Segregation has advanced significantly from its origins in the 1970s and 1980s, which initially focused on investment tax credit studies. Following the repeal of the Investment Tax Credit (ITC) in 1986, it was widely assumed that cost segregation studies would no longer offer any benefits under the new tax law. However, in 1997, a significant tax court case involving Hospital Corporation of America successfully demonstrated that engineering-based cost segregation could effectively differentiate real and personal property under existing law. Subsequently, in 2004, the IRS released the Audit Technique Guideline, outlining the expected process for conducting a successful Cost Segregation Study. This development has enabled many small and midsize companies to capitalize on a practice that was previously only pursued by larger companies.
Our Methodology
Our dedicated team of skilled professionals meticulously applies the IRS-recognized Detailed Engineering Approach to execute all Cost Segregation Studies, aiming to optimize benefits and adhere to IRS guidelines.
Cost Segregation for Condos or Apartment Buildings?
Yes, they can! Condominiums fall under a multi-family category.
Expert Support
Our team of billing specialists is always here to help. We provide ongoing support to ensure your billing processes are running smoothly and efficiently.
Client Testimonials
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