Real Estate: Cost Segregation Service Sheet
September 19, 2022
Real Estate: Cost Segregation Service SheetDownload Service Sheet
Maximizing tax deductions, depreciation and increased cash flow can be realized by simply reclassifying and accelerating the tax depreciation of real estate assets through a cost segregation analysis. With over 20 years of experience, our engineering-based services are appropriately detailed to meet the strict guidelines of the IRS and requirements for audit defense.
What is Cost Segregation?
Cost Segregation is the systematic and comprehensive analysis of all costs associated with real estate assets, whether they are purchased, newly constructed, renovated, or qualified improvements. A Cost Segregation study enables clients to maximize federal tax depreciation benefits under the Modified Accelerated Cost Recovery System (MACRS). Any business that is required to capitalize and/or depreciate real estate project costs for United States federal income tax purposes will benefit from a Cost Segregation analysis. Cost Segregation studies have now become crucial as one can now take advantage of additional bonus depreciation benefits that are part of the Cares Act enacted in 2020.
Through a Cost Segregation analysis, qualifying assets are identified, and their cost basis segregated from the total capitalized cost of the project. To achieve this, a comprehensive and detailed analysis of construction drawings, on-site inspections, and/or conversations with the client or its representatives is completed. Once the assets are identified and their cost basis determined, they are assigned an appropriate MACRS asset class, which bears a specific depreciable class life.
A Cost Segregation can also be combined with the application of the tangible property regulations (TPR) to super-charge the allowable tax deductions. For example, TPR can allow for additional deductions for partial asset dispositions (PADs) on building renovations while a cost segregation can provide for accelerated depreciation deductions on the new replacement property.