A cost segregation study is an assessment of costs associated with the construction, remodel, and/or acquisition of commercial property. The study is used to calculate accelerated depreciation as a tax deferral strategy. The process uses an engineer’s study and accounting techniques to identify assets that can be depreciated more rapidly.
Property owners may benefit from a cost segregation study as long as their property was acquired or constructed after 1986. Owners and tenants may qualify for bonus depreciation of 30% to 50% in the first year depending on the date of construction or acquisition. The resulting tax savings may increase cash flow for the company. A cost segregation study provided by a Contryman professional is reliable because we work with an engineering firm which specializes in cost segregation studies. Only cost segregation studies performed by an engineering firm are acceptable to the IRS. Following the study, costs may be reclassified to recoup depreciation from prior years without the time or expense of refiling past tax returns.
You will typically reap the greatest benefits from a cost segregation study if your property costs more than $1 million, you have owned it for less than 10 years, you are in a high tax bracket, and you are not planning to sell the property in the near future.
- The Cost Segregation engineering firm that we work with reviews architectural/engineering drawings and specification, including blueprints, contracts, and invoices
- They then reconcile all costs associated with the project
- They itemize assets qualifying for shorter life classification
- They physically inspect the facility
- Our tax professionals allocate indirect project costs, such as construction, architectural and engineering fees, permits, etc., to all project-related assessments
- We recalculate depreciation schedules based on shorter class lives
- We prepare necessary tax filings and issue a final report