Cost Segregation Studies
What is Cost Segregation?
“Purchasers of real estate can gain tremendous tax benefits by using a popular asset depreciation technique called cost segregation. Using this method, buyers view a real estate acquisition as consisting not only of land and buildings but also tangible personal property and land improvements. The tax savings come from accelerated depreciation deductions and possible easier property write-offs. A taxpayer can use cost segregation when constructing a building, buying an existing one, or, in certain circumstances, years after disposing of one so long as the year of disposition still is open under the statute of limitations (see Rev. Proc. 2004-11).” (Cost Segregation Applied by Jay A. Soled and Charles E. Falk)
“Cost Segregation: A process of identifying assets within a larger construction project and using cost estimation techniques that allocate costs to individual items of property, which can then be classified for depreciation purposes (e.g., land improvements, buildings, equipment, furniture and fixtures, etc.) The underlying incentive for building owners is the significant acceleration of tax benefits (depreciation deductions) resulting in improved current after-tax cash flow.” (The Practice of Cost Segregation Analysis by Bruce A Desrosiers, and Wayne J DelPico)