Tax
Cost Segregation
An engineering-based tax study that reclassifies portions of a real-estate purchase into shorter-lived asset classes for faster depreciation.
A standard real-estate purchase depreciates over 27.5 years (residential) or 39 years (commercial). A cost-segregation study identifies components (lighting, plumbing, parking lots, landscaping) that legally belong in 5-, 7-, or 15-year buckets, pulling depreciation forward dramatically.
Typical result on a $1M commercial property: $200K–$300K of depreciation accelerated into the first year, especially powerful when combined with bonus depreciation.
Cost typically $5K–$15K for a single property; ROI usually multiples of that through accelerated deductions.
Common pitfalls
- Doing a DIY cost-seg without a qualified engineering study; the IRS expects documentation
- Forgetting to file Form 3115 if you're applying cost-seg to a property you've already been depreciating
- Triggering passive-activity-loss limitations that defer the benefit you were trying to accelerate
Related service
See tax and CPA servicesHave a Cost Segregation situation in your business?
Federal, state, and local returns prepared and reviewed by a licensed CPA, with the planning done before year-end rather than after it.