Is Cost Segregation Analysis Worth It?

It has long been a question that has puzzled many commercial property owners. Many accountants suggest it, but it’s worth is still rarely clear.

Many owners barely even understand how it operates and is thus unable to determine its worth. As that’s the case, we’ll thoroughly explain what it is and what’s it for, but more importantly, whether or not it is worth it in the overall picture.

What Is Cost Segregation?

First of all, cost segregation is used by commercial real estate owners to reallocate property into personal property, to achieve accelerated depreciation methods and a shorter depreciable tax life.

It is a practice that involves determining the exact assets an owner has and their costs, then classifying them for federal taxes.

By using cost segregation analysis, you get the chance to determine which of your building’s costs that were classified with a 39 years depreciable life could now count as personal property or land improvement, subject to a 5, 7, 15, or 27.5 (for residential and multi-family buildings) years depreciation rate.

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