Cost segregation provides property owners with several tax advantages by properly classifying all of the interior and exterior elements of a building into their appropriate asset categories in order to depreciate them on their own IRS schedules.
These areas include the
- Building structure
- Furniture, fixtures and equipment
- Landscaping, parking lots and other land improvements
- And more
By reclassifying portions of your building assets,
owners can qualify for bonus depreciation that helps:
Increase cash flow
Accelerate Depreciation
Reduce Your Tax Bill
Ensure Compliance with New Laws
How Does the Cost Segregation Process Work?
Step 1: Assess
Get a No-cost Analysis of Your Property
CSSI will review your situation to make sure your property qualifies for and would benefit from a full-cost segregation study – including a preliminary estimate of what your savings could be.
Step 2: Analysis
CSSI Conducts a Thorough Cost Segmentation Study
Our team of tax experts examine every dimension of your property to determine how to properly classify components and identify those that qualify for a shorter depreciable life.
Step 3: Utilize
You Put Your Savings to Work
Our strategies will show you how to keep more of what’s yours – and you can use the extra cash flow for other renovations or investments.
FAQs
Find Answers to Frequently Asked Questions
About CSSI’s Products and Services
While a full study can’t be done on unconstructed buildings, CSSI can provide estimates on tax savings from your construction budgets. A full study will be delivered when construction is complete.
No, a properly conducted cost segregation study has never triggered an audit. In fact, if you are audited for any reason and the study comes into question, CSSI will defend the audit at no cost.
Savings vary, but within the first five years of building ownership, owners could save up to $100,000 for every $1 million in building costs.
Generally, we request:
- A current tax depreciation schedule
- Building cost information
- Blueprints or architectural drawings and renovation plans, if applicable
- Access to the property for an on-site inspection and walk-through
A cost segregation study typically takes approximately three to six weeks from the time we receive all the appropriate documentation.
A study can be completed in the year the building or improvements are placed in service. However, it can also be done on properties acquired or constructed since 1986 without amending prior years’ tax returns.
Your property likely qualifies if:
- It’s a commercial building or building improvements with a remaining depreciable basis
- The building or improvement cost basis is at least $200,000
- You anticipate holding the property for at least three years
A cost segregation study can typically accelerate depreciation on many building components, including:
- Electrical installations (e.g., dedicated computer power, special lighting)
- Plumbing systems (e.g., kitchen plumbing, bathroom fixtures)
- HVAC components
- Flooring (e.g., carpet, vinyl, tile)
- Window treatments
- Cabinetry and countertops
- Decorative finishes and millwork
- Security systems
- Fire protection systems
- Parking lot paving and lighting
- Landscaping and site improvements
- Certain building exterior components
A cost segregation study is an engineering-based analysis that reclassifies commercial real estate components and improvements between real and personal property. This reclassification accelerates the depreciable lives from 27.5- or 39-years to 5-, 7-, or 15-years.
A Cost Segregation study reduces a building owner’s income taxes up to $100,000 for every $1 mill in building costs. The tax savings are anywhere from 3-10% of the building cost.