Cost Segregation Studies

The Tax Cuts and Jobs Act (TCJA), signed into law on December 22, 2017, is the largest overhaul of the tax code since the Tax Reform Act of 1986. The changes related to the tax treatment of building construction, building improvements and building acquisition costs provide taxpayers with new opportunities to maximize tax benefits through a cost segregation study.

What is a cost segregation study?

A cost segregation study identifies certain personal property and land improvements that are eligible for shorter depreciation lives and bonus depreciation to satisfy tax reporting requirements. The TCJA allows qualifying assets that have a tax recovery period of 20 years or less, new and used, to now qualify for the 100 percent bonus depreciation provision in the assets’ first year of service. While the term “bonus” is often misunderstood to mean an added benefit beyond the asset’s depreciable tax base, it is a boost to accelerate the tax depreciation in the first year the asset is placed in service. Bonus depreciation has existed in prior years for new construction and some acquired assets at 50 percent in 2017. Therefore, tangible personal property either newly acquired, or constructed will qualify for bonus deprecation.

How you can benefit?

The shorter depreciation lives accelerate depreciation on the property, which increases cash flows. This reduces federal tax liability.

Methology

Our team of designated valuation consultants, appraisers, and engineers analyze the assets and properly allocate actual capital expenditures, including new and renovation costs into their appropriate cost recovery periods.

Given our vast experience ranging from skyscrapers, such as the Sears Tower and the General Motors Building, to hospitals, regional and neighborhood shopping centers, gives us the ability to perform a cost segregation personalized to your property. Cost segregation analysis should be performed on new construction and acquired assets. Typically, properties placed in service within the last 10 years are ideal candidates for retroactive cost segregation studies.

  • Apartment Complexes
  • Office Buildings
  • Hotels
  • Restaurants
  • Resorts
  • Casinos
  • Retail Shopping Centers
  • Golf Courses
  • Healthcare Facilites
  • Manufacturing Facilities
  • Industrial Buildings
  • Government Buildings
  • Construction or Expansion of New Facilities
  • Renovation of Exisiting Facilities
  • Construction or Acquisition of Landlord Leasehold Improvements
  • Past Acquisition or Construction of Assets not Properly Classified