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Cost
segregation is the process of identifying
property
components that are considered "personal
property"
or
"land improvements" under the federal tax code.
The primary goal of a cost segregation study
is to identify all
construction-related costs that can be depreciated over
a shorter
tax
life (typically 5, 7 and 15 years) than the
building
(39
years for non-residential real property).
Personal property assets found in a cost segregation
study generally
include items that are affixed to the building but do
not relate to the
overall operation and maintenance of the
building.
Land
Improvements generally include items located outside a building
that are affixed to the land and do not relate to the overall
operation and maintenance of a building. Reducing tax
lives results in accelerated depreciation deductions, a reduced tax
liability,and increased cash flow.
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