Lower Your Taxes and Increase Cash Flow with Cost Segregation

Any income-producing property placed into service after 1986 can benefit, including commercial buildings, apartment complexes, warehouses, restaurants, hotels, medical facilities, and industrial properties. The property must be used for business or investment purposes.

The main benefits include accelerated depreciation deductions, reduced taxable income, improved cash flow, and enhanced return on investment. For every $1 million reallocated from 39-year to 5-year property, the net present value benefit is approximately $200,000.

Studies typically cost $2,500 to $15,000 depending on property complexity. The average ROI is 50 to 1, meaning a $5,000 study could yield $250,000 in net present value benefits.

No, properly conducted cost segregation studies do not increase audit risk. The IRS considers cost segregation "the correct method" when performed by qualified professionals using engineering-based approaches with proper documentation.

A typical study takes 30-60 days to complete. The timeline depends on property size, complexity, and availability of required documentation during the data collection and engineering analysis phases.

Yes, cost segregation can be performed retroactively on properties acquired back to 1987. Look-back studies capture missed depreciation through a Section 481(a) adjustment filed with Form 3115, bringing all benefits into the current tax year without amending prior returns.

Required documents typically include architectural drawings, construction contracts, contractor payment records, change orders, property settlement statements, appraisals, blueprints, and rent rolls for multi-tenant properties. Studies can still proceed if some documents are missing.

The optimal time is within the tax year the building is purchased, constructed, or renovated. This allows maximum first-year benefits without filing additional forms. Studies must be completed before filing the tax return for the year you want to claim benefits.

Look for firms using engineering-based methodologies, providing detailed documentation, offering audit support, and having strong track records with no disallowed studies. Avoid DIY approaches or low-cost providers.