Cost Segregation

Cost segregation analyzes buildings to accelerate depreciation deductions. By identifying components within the building that are used for the business function of the facility as opposed to general building use, these items can be reclassified to a shorter recovery period to accelerate depreciation deductions and increase cash flow.

To complete a cost segregation analysis, basic information on the building is provided including any blueprints of the facility, purchase agreements, appraisals, and/or construction invoices. A site visit is completed of the facility to confirm building components and provide additional documentation. Through engineering estimation, building components are identified and assigned costs. These components are then assigned a recovery period according to current legislative or judicial authority.

By accelerating depreciation deductions, you can benefit by increasing cash flow and take advantage of the time value of money. Additionally, with the release of proposed regulations related to the real property definition for Section 1031 exchanges, a cost segregation study would be able to assist in identifying any personal property that may be attached to the building and would be ineligible for 1031 exchange treatment under these proposed regulations. It is also helpful to have the building components identified for any future repair or renovations to assist in determining classification as repair or calculation of a partial disposition deduction.