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SPECIALIZED TAX INCENTIVE

Cost Segregation

Unlock potential cash flow from your real estate investments. By identifying qualifying building components for accelerated depreciation, Cost Segregation can help property owners increase near-term deductions and improve cash flow.

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THE FUNDAMENTALS

Explore your real estate investment potential.

Cost segregation is a proven tax planning approach that allows commercial property owners who have recently bought, built, expanded, or remodeled real estate to increase immediate cash flow.

It achieves this by identifying and reclassifying personal property assets and land improvements to shorten their depreciation recovery periods, rather than depreciating the entire building over the standard 39 years (or 27.5 years for residential rental).

Explore your real estate investment potential. Explore your real estate investment potential. Explore your real estate investment potential. Explore your real estate investment potential. Explore your real estate investment potential.
ADVANTAGES

Key Benefits of Cost Segregation

Accelerated Depreciation

Identify qualifying assets with shorter recovery periods to accelerate depreciation deductions and potentially improve near-term cash flow.

Asset Write-Off Opportunities

Detailed asset identification can help support the appropriate tax treatment of qualifying components when property is replaced, renovated, or disposed of.

Detailed Supporting Documentation

An engineering-based Cost Segregation study provides detailed asset classifications and supporting documentation for the depreciation positions reflected in the study.

Tax Deferral & Cash-Flow Timing

Accelerating depreciation on qualifying property may shift deductions into earlier years, potentially reducing near-term tax liability and improving cash-flow timing.

THE MECHANICS

How Cost Segregation Works

A typical commercial property depreciates over 39 long years. Cost segregation breaks this down to unlock faster depreciation timelines.

STANDARD METHOD

39-Year Blanket Depreciation

Most of the building and its structural components are depreciated over 39 years.

COST SEGREGATION METHOD

Reclassified Component Timelines

We analyze and identify qualifying building components that may be depreciated over shorter recovery periods:

5-Year Specialty electrical, decorative fixtures, equipment hooks
15-Year Land improvements, sidewalks, fencing, parking lots, landscaping

THE PROCESS DETAILS

What's Involved in a Study?

Our engineering-led process leaves no stone unturned. Our experts analyze structural blueprints, review contractor invoices, and conduct comprehensive physical site inspections to accurately catalog and classify qualifying components.

When historical details are limited or incomplete, our engineering team can use available records and appropriate estimation methods to identify and support qualifying property classifications.

OPTIMAL TIMING

When Should You Conduct a Study?

The absolute best time is immediately following the purchase, construction, or extensive remodeling of a commercial property. This lets you realize the tax-deferral benefits as early as possible.

Cost Segregation can also be performed on properties acquired, constructed, or improved in prior years. Depending on the circumstances, previously unclaimed depreciation may be addressed through an accounting method change, potentially allowing eligible catch-up depreciation without amending prior-year returns.

STREAMLINED TIMELINE

Our 3-Step Methodology

01

Kick-Off Consultation

We conduct an initial 30-minute kick-off session to review the target real estate portfolio and quickly assess high-level eligibility.

02

Detailed Analysis

Our specialists analyze blueprint assets, map cost categories, perform site surveys, and develop the property-specific depreciation analysis.

03

Comprehensive Report

Receive a fully documented report with detailed asset classifications and depreciation schedules, ready for your CPA to integrate into your tax filings.

DOCUMENTATION STANDARDS

Built for IRS Compliance

Every cost segregation study we deliver is built with detailed engineering analysis and supporting documentation designed to support the tax positions reflected in the study.

Engineering-Based Analysis

Our studies are performed by licensed professional engineers who conduct physical site inspections, review available plans and project documentation, and apply established cost segregation methodologies. Component classifications are supported by engineering analysis and available property data.

Comprehensive Documentation

We deliver fully documented workpapers covering all component classifications, cost allocations, depreciation schedules, and baseline assumptions — everything your CPA needs to file accurately and confidently.

Audit-Ready Reports

Our reports include supporting documentation such as site photos, component classifications, cost allocation methodologies, depreciation schedules, and relevant supporting references to help substantiate the study if questions arise.

Post-Engagement Support

Our relationship doesn't end at delivery. We work directly with your CPA or tax advisor to support integration into your returns and remain available to respond to any follow-up questions or IRS correspondence.

COMBINED STRATEGIES

Evaluating Combined Tax Strategies

Cost Segregation can sometimes work alongside other tax strategies. Evaluating these opportunities together can provide a more complete view of the potential tax benefits available to a business.

COMBINATION 1

Cost Segregation + Section 179D

✓ Cost Seg accelerates depreciation on qualifying building components
✓ Depending on the property and applicable requirements, Cost Segregation and Section 179D may identify different tax opportunities associated with the same commercial property.
✓ Both strategies address different aspects of commercial property tax treatment
✓ Evaluation depends on property characteristics, tax circumstances, and applicable limitations

Best for: Commercial property owners with qualifying energy-efficient improvements

COMBINATION 2

Cost Segregation + R&D Tax Credit

✓ Cost Seg generates depreciation deductions from qualifying real estate components
✓ R&D credits offset income tax liabilities on qualifying activities
✓ Ideal for tech-forward businesses that also own commercial facilities
✓ When applicable, evaluating both strategies can uncover different tax-saving opportunities within the same business.

Best for: Manufacturers, tech companies, and AEC firms with owned facilities

A Broader View of Your Tax Opportunities

Businesses investing in facilities, property improvements, technical development, or energy-efficient building systems may have more than one tax strategy worth evaluating. Reviewing these opportunities together can help provide a more complete picture of the potential benefits available.

INDUSTRIES & PROPERTY TYPES

Common Property Types That Benefit from Cost Segregation

Cost segregation is not limited to one industry. It can be applied across a wide range of commercial properties and business types to accelerate depreciation and improve cash flow.

Hospitality

Hotels, resorts, restaurants, and lodging properties may contain qualifying electrical, plumbing, and decorative components that may be eligible for shorter depreciation periods.

Multifamily Housing

Apartment complexes, student housing, and mixed-use residential developments may contain qualifying common-area improvements eligible for accelerated depreciation.

Retail Properties

Shopping centers, restaurants, and retail storefronts may contain qualifying specialized lighting, and tenant improvement assets that may be eligible for shorter depreciation periods.

Manufacturing Facilities

Industrial facilities may contain qualifying electrical, process piping, and equipment-related improvements eligible for accelerated depreciation.

Warehouses & Distribution

Warehouse and distribution centers may contain qualifying specialized lighting, racking systems, and material-handling equipment eligible for shorter depreciation periods.

Healthcare Facilities

Medical offices, clinics, and specialized care facilities may contain qualifying medical equipment, specialized lighting, and other components eligible for accelerated depreciation.

Office Buildings

Office buildings, especially those with high-end tenant improvements, may contain qualifying components eligible for shorter depreciation periods.

Self-Storage

Self-storage facilities may contain qualifying security systems, lighting, fencing, and site improvements eligible for accelerated depreciation.

Mixed-Use Properties

Mixed-use developments may contain qualifying residential, retail, and office components eligible for accelerated depreciation across the property.

COMMON QUESTIONS

Frequently Asked Questions

Cost segregation can be applied to virtually any commercial or income-producing property, including office buildings, retail centers, hotels, restaurants, warehouses, industrial facilities, apartment complexes (5+ units), and mixed-use developments. The property must be depreciable under U.S. tax law — meaning it must be used in a trade or business or held for the production of income. Residential properties used as primary residences do not qualify.
The savings depend on the property type, purchase price, construction cost, and your effective tax rate. On average, property owners can reclassify 20-40% of a building's depreciable basis into shorter-life assets. For a $5 million commercial property at a 35% effective tax rate, this could translate to $200,000-$400,000 or more in accelerated deductions in the first year. Our complimentary preliminary assessment will provide a property-specific estimate before any engagement begins.
Yes — and this is one of the most valuable opportunities in the program. If you own a property that was acquired or improved in a prior tax year and a cost segregation study was never performed, you can capture all of the missed accelerated depreciation in the current tax year using a Form 3115 (Change in Accounting Method). This catch-up depreciation is claimed without filing amended returns, making it a highly efficient way to recover deductions from prior years. There's no statute of limitations for claiming a change in accounting method.
For most commercial properties with complete documentation, we can deliver a certified study within 4-8 weeks of completing our on-site inspection and receiving all required records. Complex portfolios, larger properties, or projects with incomplete historical records may take longer. We always communicate a clear timeline upfront and work to meet your tax filing deadlines. Rush studies may be available in time-sensitive situations — ask our team.
No. Cost segregation is equally applicable to recently purchased properties, major renovations, tenant improvement projects, and existing properties where a study has never been conducted. In fact, catch-up studies on existing properties frequently generate some of the largest immediate benefits, since all the missed depreciation from prior years is captured in a single current-year deduction. Whether you acquired the property last year or a decade ago, a study is worth evaluating.
Cost segregation is a well-established, IRS-accepted tax planning strategy that has been recognized and upheld by courts since the 1997 Hospital Corporation of America case. The IRS itself has published a Cost Segregation Audit Techniques Guide to help agents review these studies, which is a strong indicator of the practice's legitimacy. While no tax strategy can entirely eliminate audit risk, the quality of the underlying study - engineering-based classifications, thorough documentation, and defensible methodology - is designed to help substantiate the positions reflected in the study.
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