Real Estate Cost Segregation Studies
Reap the benefits of substantial tax savings with real estate cost segregation.
Real estate cost segregation is the process of separating the costs of property (depreciable over 5 to 15 years) from the building and land acquisition or construction costs incurred after 1986 (generally depreciable over 27.5 to 39 years). Typically, 25 to 40 percent of costs are reclassified to shorter lives.
Performed by tax and engineering professionals, the practice of segregating building and land costs is primarily based on recent favorable court rulings and Internal Revenue Service Procedure 2002-9. There are also more than 75 prior IRS revenue rulings, procedures and court cases that support cost segregation studies.
Accelerating current and future depreciation deductions or catching up for depreciation deductions during prior years results in:
- Lower current income taxes
- Increased cash flow
Real estate cost segregation can be performed for buildings acquired, constructed, expanded or enhanced since 1986. Buildings with the greatest potential for savings include:
- Auto dealerships
- Industrial/manufacturing facilities
- Office buildings
- Retail chains
- Shopping centers
- Apartment complexes
- Long-term care facilities
- Medical centers
- Recreation/sports facilities