What is a Cost Segregation Study?
Cost Segregation is a dynamic IRS-approved approach to accelerating depreciation on investment properties, dramatically reducing your taxable income. As an example, comparing straight line depreciation to the refined results of a “Cost Segregation Study”, a single-family residence (rental property) in Southwest Florida with a “Cost Basis” of $550,000, reflects a first-year depreciation of $9,000. That same home through a Cost Segregation Study reflects a first-year depreciation of $155,000. If that property owner was in a 30% tax bracket, their actual tax savings would be $46,500.
An Advanced Method of Depreciation
Most property investors are aware that the IRS allows depreciation on residential rental properties over a 27.5 year period and commercial properties over 40 years.
What very few investors know is that the IRS also allows a methodology that accelerates depreciation known as a Cost Segregation study.
Within our study and subsequent comprehensive report, our staff of Construction Cost Professionals and Tax Specialists work together to identify, quantify, and classify, numerous components within your property into their depreciable classes. By breaking down a property’s costs into shorter-lived assets, investors can accelerate depreciation, resulting in reduced taxable income.