What is a cost segregation study?

A cost segregation study is an engineering-based tax analysis that reclassifies portions of a building from 39-year (commercial) or 27.5-year (residential) depreciation into 5, 7, or 15-year property classes — accelerating deductions and improving near-term cash flow.

Who benefits from cost segregation?

Contractors who own their shop or yard, developers, and real estate owners who have purchased, built, expanded, or significantly renovated a property valued above roughly $500K typically see the strongest returns.

When is the best time to do a cost segregation study?

Ideally in the same tax year a property is placed in service. You can also catch up missed depreciation on properties owned for years through a Form 3115 change in accounting method — no amended returns required.

How much does a cost segregation study cost?

Most engineering-based studies run between $5,000 and $15,000 depending on property type and size. The tax savings in year one typically dwarf the fee by a 10x or greater margin for qualifying properties.

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