What Is a Cost Segregation Study?
How It Works, What It Costs & Whether It's Worth It
If you own investment real estate, your property is almost certainly depreciating more slowly than the IRS allows. That means you're paying more in taxes than you need to, potentially tens of thousands of dollars more every year.
A cost segregation study is an engineering-based analysis of your real estate that breaks the property into individual components and assigns each one to the shortest allowable depreciation timeline. Instead of depreciating your entire building over 27.5 years (residential) or 39 years (commercial), a cost seg study reclassifies portions of the property into 5-, 7-, and 15-year categories. The result: significantly larger deductions in Year 1.
This guide covers how a cost segregation study for real estate works, what it costs, who it's right for, and whether it makes financial sense for your property. We'll walk through a real property example with actual numbers.
A cost segregation study is an engineering-based analysis of your real estate that breaks the property into individual components and assigns each one to the shortest allowable depreciation timeline. Instead of depreciating your entire building over 27.5 years (residential) or 39 years (commercial), a cost seg study reclassifies portions of the property into 5-, 7-, and 15-year categories. The result: significantly larger deductions in Year 1.
This guide covers how a cost segregation study for real estate works, what it costs, who it's right for, and whether it makes financial sense for your property. We'll walk through a real property example with actual numbers.