Cost Segregation Studies

A cost segregation study identifies and reclassifies qualifying components of real property into shorter depreciation recovery periods, allowing property owners to accelerate depreciation deductions and potentially reduce taxable income in earlier years.

Cost segregation can benefit newly constructed, acquired, or renovated properties. By distinguishing building components associated with the operation of a business from the building's structural components, qualifying assets may be depreciated over shorter periods.

Under the Modified Accelerated Cost Recovery System (MACRS), nonresidential real property is generally depreciated over 39 years, while residential rental property is generally depreciated over 27.5 years. Certain qualifying assets may instead be depreciated over shorter recovery periods, including 5, 7, and 15 years.

*Cost segregation generally changes the timing of depreciation deductions rather than eliminating taxes owed. By accelerating qualifying deductions into earlier years, property owners may improve near-term cash flow and realize the time-value benefits of earlier tax savings.