The When And Why Of Cost Segregation Studies

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Written by Patrick Esteban | Posted in Cost Segregation Study • TaxConnections

The When and Why of Cost Segregation Studies

What are the Benefits of a Cost Segregation Study?

There are a number of benefits associated with a Cost Segregation study and its various applications. To the extent you have taxable income, a study will help mitigate some or all of the tax liability for the current and possibly future years. This is most often achieved through the acceleration of depreciation deductions and the resulting tax deferral. The study will identify assets that are eligible for Bonus Depreciation treatment.

When prepared correctly, these studies can also be an excellent reference tool to deploy the various strategies available to property owners as contained in the Tangible Property Regulations with respect to expensing of certain incoming improvements as well as taking advantage of the Partial Asset Disposition (PAD) deduction.

Also, in light of the Tangible Property Regulations, a comprehensive study such as, Fixed Asset Review, can also properly document all assets that might be subject to disposition in the future.”

To learn more about using cost segregation throughout the Life Cycle of Real Estate, and the additional benefits that may be available please visit our Life Cycle of Real Estate page.

When Should a Cost Segregation Study be Conducted?

The timing of a cost segregation study can have a significant impact on the potential benefits and tax savings. Here are some ideal scenarios when a study should be conducted:

New Construction Or Property Acquisition:

Conducting a study shortly after the construction or acquisition of a commercial property ensures that the maximum tax benefits are captured from the beginning. This also allows for more accurate data collection and easier access to relevant records.

Recent Building Renovations Or Improvements:

Change In Property Use:

Catch-Up Depreciation:

Tax Planning:

Leasehold Improvements:

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