Under United States tax laws and accounting rules, cost segregation is the process of analyzing and identifying personal property assets that are grou A cost segregation study identifies and reclassifies personal property assets to shorten the deprec...
Under United States tax laws and accounting rules, cost segregation is the process of analyzing and identifying personal property assets that are grou A cost segregation study identifies and reclassifies personal property assets to shorten the depreciation time for taxation purposes, which reduces current income tax obligations. Personal property assets include a building’s non-structural elements, exterior land improvements and indirect construction costs.
Analysis of personal property assets is used to determine appropriate asset classifications. Cost segregation identifies building costs that would typically be depreciated over a 27.5 or 39-year period and reclassifies them to permit a shorter, accelerated method of depreciation for certain building costs. Costs for non-structural elements, such as wall covering, carpet, accent lighting, portions of the electrical system, and exterior site improvements such as sidewalks and landscaping, can often be depreciated over five, seven or 15 years, rather than over 27.5 or 39 years.
Identify assets that are currently being depreciated over 27.5 and 39 years and reclassify them as assets that can be depreciated over 5, 7 and 15 years. This process loads up your front end depreciation on assets, giving the property owner a larger current deduction, which reduces their current tax obligation.
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