Cost Segregation Overview
Cost Segregation is an IRS-approved application by which commercial property owners can accelerate deprecation and reduce the amount of taxes owed. This savings generates cash flow that owners often use to reinvest in the business, purchase more property, apply to their principle payment or spend on themselves.
It’s simple, legal and recommended in the August, 2004 issue of the Journal of Accountancy for CPA’s. The article stated, “A taxpayer can substantially increase cash flow by segregating property costs.”
Cost Segregation Study
Cost Segregation Services, Inc. (CSSI), an experienced and qualified engineering company, performs the cost segregation study on your property. The study accelerates the depreciation of your building/renovation components into faster depreciation categories such as 5-, 7-, and 15- year rather than conventional 27.5- and 39-year schedules. Five- and 7-year items might include decorative building elements, electrical for dedicated computer equipment, and carpet. Fifteen-year items might include site utilities, landscaping and paving.
This engineered cost segregation study results in a much higher depreciation expense and significantly reduced taxable income for the property owner. Best of all, the IRS ruling states cost segregation can be applied to all categories of buildings purchased or built since 1986, including renovations, and this provides for the results to be easily applied to your tax return.