Understanding Cost Segregation Studies & Potential Tax Benefits

Most CFMs know about depreciation and the specialized rules that should be scrutinized to ensure all potential tax deductions are considered. A cost segregation study can help CFMs and property owners accelerate depreciation deductions, resulting in increased tax deductions and thereby increasing cash flow. This article will present an overview of the cost segregation study process and its potential tax benefits. Overview A cost segregation study is a financial and engineering study of new or existing properties or improvements to identify tangible personal property and other improvements that qualify for shorter tax depreciable lives. The study enables acceleration of federal (and sometimes state) income tax depreciation, which can result in federal income tax savings. Let’s consider an example: A business owner purchases or builds a facility for his or her operation that would be depreciated over 39 years. If a portion of the property can be depreciated quicker, then the owner’s taxes would be lower in the immediate future because… read more →