Cost Segregation

Cost segregation is a tax strategy that breaks a property's cost basis into components with shorter depreciation schedules, such as fixtures or site improvements, instead of depreciating the entire building over one long schedule. This accelerates depreciation deductions in the early years of ownership.

Example

Instead of depreciating all $8,500,000 of building basis over 27.5 years, a cost segregation study might reclassify $1,700,000 of it into 5, 7, and 15 year property. Same total deduction over the life of the asset, far more of it in the first few years.