Cost Segregation Studies

With the boom in real estate values in the last couple of years, many casual and professional real estate investors are looking for ways to save in taxes on their real estate investments. One strategy is to complete a cost segregation study. Cost segregation studies, or "cost segs" for short, are prepared to allocate or reallocate building costs to tangible personal property. A cost seg identifies and reclassifies personal property from real property assets to shorten the depreciation time for tax purposes. This, in turn, reduces current income tax obligations. Personal property, or section 1245 property, includes assets that are non-structural elements. Other property such as land improvements can also be depreciated with shorter lives. The deduction created from the cost seg will directly reduce taxable income. Cost segs must be completed by a qualified cost segregation provider. Reach out to your CPA to ask if a cost seg is right for your situation.