Who Qualifies for a Cost Segregation Study?

Are you a commercial property owner or investor? If so, you may have heard about a cost segregation study. This tool can help you reduce your tax burden by accelerating deductions for certain property assets. However, not all property owners qualify for this study.

A cost segregation study is a detailed analysis of the assets in a commercial property. The objective is to identify assets that qualify for shorter depreciable lives than the building itself. These assets can include items such as carpeting, lighting fixtures, and electrical systems. By accelerating deductions for these assets, property owners can reduce their taxable income and potentially save thousands of dollars in taxes.

So, who qualifies for a cost segregation study? Generally, any commercial property owner who has purchased a building, constructed a new building, made renovations, or completed a leasehold improvement within the past 15 years can benefit from a cost segregation study. The benefits of a cost segregation study are not limited to just new properties, even if you purchased your building decades ago, it is worth examining to see if a cost segregation study can reduce your tax burden.

It is important that commercial property owners work with a qualified professional to conduct a cost segregation study. The analysis involves detailed cost accounting and engineering principles, making it critical to have an expert who can accurately identify and categorize assets appropriately.

Another key factor in determining who qualifies for a cost segregation study is the size of the building. Properties valued at $750,000 or more typically have the resources to justify the cost of conducting a cost segregation study. However, even if your property is below this value, it is still worth investigating if the potential tax savings outweigh the costs of the study.

The conclusion of a cost segregation study can yield significant tax savings for commercial property owners. It allows owners to take advantage of shorter depreciable asset lives that may not be readily apparent with a standard depreciation schedule. If you are a commercial property owner, it may be time to consider a cost segregation study to reduce your tax burden and increase cash flow.

Conclusion

A cost segregation study can be an effective way for commercial property owners to reduce their tax burden. While not all property owners qualify for this study, it is worth exploring if it could lead to significant tax savings. Property owners should work with a qualified professional to conduct the study and accurately identify assets that qualify for shorter depreciable lives. With the potential for significant tax savings, a cost segregation study is a valuable tool for commercial property owners to consider.