Cost segregation is a tax planning technique that can increase cash flow by accelerating federal tax depreciation of construction-related assets by depreciating assets over 5, 7, and 15-year lives instead of 27.5 or 39 years.
The average commercial building owner will realize approximately 25 to 95 percent of their building’s total costs as shorter class-life depreciable assets, depending on the asset type. This can result in major tax savings and increased cash flow for real estate owners.
As an added benefit, the cost segregation study may open the door to bonus depreciation, which means as the owner of the building, you don’t have to wait for five, seven, or 15 years for depreciation class lives to kick in; you could take all the reclassified items in year one.
If you own a commercial or residential building with a tax liability, you may benefit from a cost segregation analysis. The average cost-segregation fees range from $8,000- $12,000, so keep that in mind when assessing whether a study might be worthwhile from a cost-benefit perspective.
Opportunities exist for:
Newly constructed or acquired buildings
Buildings constructed or acquired in prior years
Significant remodel, renovation, or expansion activities
Property constructed or purchased during or before 1988
If you own a building, it’s worth a conversation to see if you would benefit from a cost segregation study and the potential tax benefits of accelerated depreciation.
We at Maner Costerisan have the experts on hand that will be able to help assist you from a cost segregation perspective and from a tax savings perspective.
Be sure to contact us at maner@manercpa.com or call us directly!
The materials provided in the News & Insights section are for general informational purposes only and may not reflect the most current legal, tax, or financial developments. While we strive to ensure accuracy at the time of publication, Maner Costerisan does not guarantee that the information remains up-to-date or free from error. We recommend consulting directly with a Maner Costerisan team member to confirm the applicability and relevance of any information to your specific situation.
