A cost segregation study is a process of identifying personal property assets that would typically be depreciated over 39 years as part of a building and reclassifying these assets into class lives of five, seven or 15 years. Having a cost segregation study allows for accelerated depreciation expense and a reduction of taxable income.
Recent IRS procedures allow owners of commercial real estate to go back in time to "catch up" depreciation deductions that were warranted, but not taken, in previously filed tax returns. The procedure offers you the opportunity to file using this catch up amount without amending previous years' returns. The immediate correction or catch up can go back as far as 1987 and is applied to a single (current) tax year as an acceleration of depreciation expense. This means you can enjoy tax deductions right now that you'd otherwise have to wait years to receive.
A cost segregation study is recommended if you are:
- Building a new facility
- Acquiring an existing building
- Improving, renovating or expanding an existing building
- Conducting leasehold improvements on your current facility
Cost segregation studies are beneficial especially for:
- Apartment complexes
- Automobile dealerships
- Distribution centers
- Fast food restaurants
- Food processing facilities
- Manufacturing plants
- Medical centers
- Nursing homes
- Office buildings
- Retail chains
- Shopping malls
- Sports stadiums
For more information about cost segregation studies or HORNE's tax services, contact a member of our HORNE tax team.