|Cathy A. Robinson, CPA|
Cost segregation studies are a tax planning tool that can help companies or individuals, who have constructed, purchased, expanded or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions.
When you purchase property, it does not just include a building, but it includes various components of the interior or exterior. These components, such as a parking lot, wiring, carpet, and electrical outlets may all qualify to be depreciated quicker than 39 years by the owner. The purpose of a cost segregation study is to identify all of the potential property related costs that could possibly be depreciated over five, seven or fifteen years.
The best time to have a cost segregation study completed is during the year of construction, purchase or remodel. However, it still can be completed at a later date. It is important to also consult your accounting professional when considering a cost segregation study as they will work closely with the professional who will be performing the study.
In the end, a cost segregation study is a valuable and effective planning tool available to any owner of real estate property. It offers the owner the opportunity to defer taxes, reduce overall tax burden and free up capital thus improving cash flow. As a taxpayer who owns, renovates or constructs real estate, you stand to benefit from having a cost segregation study performed on your property.