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Cost Segregation Studies

Any company which has built, renovated, or acquired a facility within the past 10 years likely has significant opportunity to improve cash flow and lower tax rates through an engineering-based cost segregation study. These studies “carve out” the personal property costs associated with a building project and reclassify them to the appropriate shorter tax life – often 5, 7 or 15 years instead of the 39 years used to depreciate real property or 27.5 years for residential rental property.

The tax laws signed into law in 2017 have more favorable bonus depreciation rules and expanded definitions for Qualified Improvement Property (QIP) which allow cost segregation studies to provide additional value. Bonus depreciation on eligible assets is going from 50% in 2017 to 100% on property placed in service after September 27, 2017 and on or before December 31, 2022. Thus, the greater the amount of shorter life property identified in a cost segregation study the greater the benefits.

More about cost segregation studies: