Cost Segregation Studies

The complexity of the tax code is often a barrier to otherwise sound business decisions. One statement, however, rings loudly with most business owners—a tax deduction today is worth more than a tax deduction tomorrow.

In a cost segregation study, we analyze a building and its components in an effort to reclassify a significant amount of expenditures from slower-depreciating categories to quicker-depreciating categories.

Here’s how it works. Working with a team of qualified engineers, we study blueprints, contractor correspondence, zoning information, loan applications and the building itself. We compare the costs expended by the client to national databases of expenditures for construction in the same industry. Ultimately, we decide how to allocate the cost of the building for tax depreciation purposes. Obviously, we make every effort to identify as many short-lived assets as possible.

The results are outstanding! The accelerated tax deduction has the direct effect of lowering the overall financing cost of the building because saved tax dollars can be used to accelerate pay-down of the acquisition. Interestingly, we can even study buildings placed in service as far back as 1987 and make a “catch-up” deduction in the current year.

If some of the following characteristics apply to your building or addition, the cost segregation study may be of benefit to you:

• You spent $1 million or more for the structure.
• You are a manufacturer.
• There is a significant amount expended for site and/or land improvements.
• There is a great deal of exterior ornamentation associated with your building.