Cost Segregation

・What is Cost segregation?

To owners who hold investment properties, such as Apartments and Commercial properties

To accelerate depreciation, you can have a chance to improve your cash flow significantly. This approach is very beneficial to the property owners. You can save hundreds of thousands of dollars in income tax by reclassifying into a much shorter depreciation class.
A depreciation term approved by the IRS is 27.5 years for residential property and 39 years for commercial property. However, non-structural components of a building can be “carved-out” and depreciated over a much shorter time period, such as 5-7 years for carpeting, decorative finish, fixtures and 15 years for land improvements, like parking lots, sidewalks and landscaping. Usually, 20 to 35% of components of the whole building could be classified into a shorter period and save thousand of dollars in tax. Generally, CPA or accounting firms are reluctant to do this because either they may not realize that this approach exists or they just file with a simple straight-line depreciation schedule because that is much easier.

If you answer "yes" to the following questions, then this approach to changing your depreciation will be a valuable tax benefit for you.

Is the cost of your building at least $750,000?

Have you purchased, constructed or renovated since 1987?

Do you plan on retaining the property for the next few years?

Do you have net income that is being taxed?

※If you have not taken advantage of this approach, you my still benefit from the correction of missed depreciation in past years without filing an amended return.