Cost segregation is a strategic tax savings tool that allows companies and individuals who have constructed, purchased, expanded, or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes.
In general, it is easy to identify furniture, fixtures, and equipment (FF&E) that depreciates over 5 or 7 years for tax purposes. However, a cost segregation study goes far beyond that by dissecting construction costs typically depreciated over 27.5 or 39 years. The primary goal of a cost segregation study is to identify all construction-related costs that can be depreciated over 5, 7 and 15 years. For example, 20% to 50% of the total electrical costs in most buildings can qualify as personal property (depreciated over 5 or 7 years). Reducing tax lives resulting in accelerated depreciation deductions, a reduced tax liability, and increased cash flow.
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