Cost Segregation Studies

A cost segregation study is an in-depth analysis of the costs incurred to build, acquire or renovate a real estate holding. Typically, these costs are capitalized and depreciated over 39 years for commercial real estate and 27.5 years for residential real estate. But many construction-related costs are eligible for accelerated depreciation. Reducing tax lives allows an organization to significantly decrease its tax liability and increase its cash flow.

Items that qualify for accelerated depreciation include office furniture, carpeting and millwork, as well as some not-so-obvious construction costs like architectural fees, security systems, ventilation and exhaust systems, decorative lighting and fences.

The savings potential can be great for owners or tenants of various properties from industrial buildings to restaurants to athletic facilities. For instance, every $1 million in assets reclassified from a 39-year recovery period to a 5-year recovery period results in a net present value of over $200,000. Additional benefits received from a well-designed cost segregation study include reduction of real estate and personal property taxes, increased cash flow, opportunity to claim "catch up" depreciation without amending prior returns and information that is invaluable in managing capital assets.

At our firm, we realize how important it is for our clients to take advantage of every tax opportunity. For a free feasibility study to determine the possible tax savings a cost segregation study would bring you, please contact us either by email, visiting our contact page or by phoning our Buffalo office at (716) 854-5034.