What is a Cost Segregation Study?

Posted on November 21, 2017

A cost segregation study breaks down the total cost of real property into separate and distinct components that property owners/investors may depreciate faster than the building itself. More specifically, it can provide investors with significant income, property and estate tax savings by allowing them to depreciate certain assets over five to seven years rather than the 39 years the Internal Revenue Code requires for commercial real estate.

Once considered a tool reserved for owners of the largest commercial real estate projects, a cost segregation study is now considered a beneficial tax-planning and cash-flow improvement strategy for owners of almost every size property. However, it is important to note that the IRS looks critically at cost segregation studies to ensure the accuracy of the procedures and methodologies used to prepare the study and prevent any potential abuse of its use. Therefore, investors should work closely to prepare a report with a team of professional accountants, engineers and experienced real estate advisors.

The professionals with Orion Real Estate Group work with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.