Cost segregation studies are an exploding area of tax planning and a virtual necessity for anyone who acquired a building in the past seven years at a cost over $500,000.
These studies allow the owner of a purchased or constructed building to segregate the costs of the building into real property and personal property components. This is a critical distinction as the components of tangible personal property and land improvements are allowed an accelerated depreciable life of 5 to 15 years instead of nondepreciable land or the depreciable life of 39-year or 27.5-year for nonresidential and residential real property, respectively.
Taxpayers that want to claim rapid depreciation deductions for the parts of a building's cost that are tangible personal property will need detailed, objective proof in the form of construction, engineering or architectural reports for these federal and state tax deductions.
The IRS has stated that an accurate cost segregation study cannot be based on "non-contemporaneous records, reconstructed data, or taxpayer's estimates or assumptions that have no supporting records." That is why we work closely with general contractors, subcontractors and certified appraisers to obtain accurate documentation to use for the computations and analysis necessary for our cost segregation studies.