What is Cost Segregation?
A cost segregation study identifies and reclassifies personal property assets to shorten the depreciation time for taxation purposes, which reduces current income tax obligations. Personal property assets include a building's non-structural elements, exterior land improvements and indirect construction costs.
The primary goal of a cost segregation study is to identify all construction-related costs that can be depreciated over a shorter tax life (typically 5, 7 and 15 years) than the building (39 years for non-residential real property). Personal property assets found in a cost segregation study generally include items that are affixed to the building but do not relate to the overall operation and maintenance of the building.
How do I benefit from the increase in Depreciation?
A property owner who uses a cost segregation study is able to increase their cash flow by recouping their cash investment faster while offsetting some tax burden AND
At same time, allows lenders to use the full amount of depreciation toward income for loan approval purposes.
This allows investors to recoup down payment and property rehab investment quickly to reinvest in other opportunities.
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