Cost Segregation Study

Category: finance

A strategic tax planning tool that accelerates depreciation deductions on commercial real estate.

Normally, a commercial building depreciates over 39 years. A "Cost Seg" study sends engineers in to separate the building into parts (e.g., carpets, light fixtures, fences) which can be depreciated in 5 or 15 years. This creates a massive, immediate paper loss that shields the investor’s income from taxes.

Common Examples

• The syndicator ordered a cost segregation study on the new acquisition to maximize the first-year tax write-offs for their limited partners.
• A cost segregation study is a highly specialized engineering audit that pays for itself through immediate, accelerated tax savings.