Cost Segregation Services | FTI Consulting

Cost Segregation Services

Real Estate

December 28, 2017

Significant tax savings and increased cash flow can be realized by simply reclassifying and accelerating the tax depreciation of real estate assets through a cost segregation analysis. Cost segregation analyses should be considered on all new construction, renovations, expansions, acquisitions and leasehold improvements, as well as for properties already on your balance sheet and those that have been sold. Our engineering-based services are sufficiently 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 part of leasehold 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.

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.

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