Cost Segregation

A cost segregation study is used in real estate to maximize tax benefits for commercial property owners. It identifies individual components of a property that can be depreciated faster than the entire building itself.

Here's a breakdown of why you might get one:

• Tax savings: By separating out shorter-lived components like lighting fixtures and HVAC systems (which can be depreciated in 5-15 years) from the building structure (depreciated over 27.5-39 years), you can claim greater depreciation deductions in the early years of ownership, reducing your taxable income.
  

• Increased cash flow: The tax savings translate to more cash in your pocket.

Here are some resources for further reading:

• https://www.irs.gov/pub/irs-pdf/p5653.pdf

• Cost Segregation Study Explained

I had the pleasure of meeting with Kim Lochridge, the Executive Vice President of Engineered Tax Services the other day. She performed a cost segregation study on an Airbnb for one of the clients advise. The study itself cost about $3000 but ended up saving the client almost $50,000 in taxes!

It is definitely worth looking into if you own a rental/commercial property or plan to invest in one in the near future.

Kim can be reached at 801-589-0779 or by email at klochridge@engineeredtaxservices.com