cost segregation
for tax savings
Cost segregation is a tax strategy that helps real estate investors save money by accelerating depreciation on parts of their properties. When you buy, build, or renovate a building. Whether it’s a house, office, or store, you can claim tax deductions based on the value of the property over time. Normally, buildings are depreciated over a long period, such as 27.5 years for residential properties and 39 years for commercial ones. But with cost segregation, you can speed up these deductions.
What is Cost Segregation?
Step-by-Step Cost Segregation Process
1. Initial Consultation
The process kicks off with a meeting between the property owner and our advisor. Here, the advisor learns about the property’s features and the owner’s tax and financial goals.
2. In-Person/Virtual Site Visit
Our engineer collects additional information about the property to inspect structures, fixtures, and equipment, gathering measurements, photos, and documents.
3. Asset Classification
Our engineer classifies each asset (e.g., fixtures, building structures) using IRS guidelines, identifying their depreciation periods.
4. Cost Allocation
Costs are assigned to each asset by analyzing construction records and invoices.
5. Final Report
A detailed cost segregation report is prepared, breaking down asset classifications and depreciation schedules.
6. Review
The cost segregation report is then submitted and reviewed by the property owner and their tax advisor.
Accelerate Depreciation, Maximize Cash Flow
Cost segregation breaks down your property into different components, like plumbing, electrical systems, flooring, or roofs. Normally, these parts would depreciate slowly, but cost segregation allows you to claim some of these items faster, within 5 to 15 years—giving you bigger tax breaks sooner.
By accelerating depreciation, cost segregation reduces your taxable income, which means you pay less in taxes each year. This extra cash flow can be used for new investments or to cover other expenses. In other words, cost segregation helps you keep more money in your pocket while you continue to grow your real estate portfolio.