What Is Cost Segregation?

Cost Segregation Tax Savings Benefit Analysis

If you as a commercial real estate investor have completed a 1031 exchange and the replacement property you purchased cost more than the property or properties you sold, you may be eligible for substantial state and federal tax savings that you can only obtain through a cost segregation study.

A cost segregation study is a strategic analysis that allows owners of commercial real estate to increase their cash flow by accelerating depreciation-related tax deductions. To do so, the study identifies, segregates and reclassifies property costs currently being depreciated over the typical 39-year depreciable period to shorter depreciable periods of 15, 10, 7 or even 5 years. This means you can enjoy tax deductions right now that you’d otherwise have to wait years to receive. So you’ll not only increase the net value of current tax savings, but also boost your cash flow.