Cost Segregation is an in-depth analysis performed by qualified individuals skilled in engineering, construction, and taxation for the purpose of identifying the individual building assets, their associated costs, and appropriate recovery period classification for federal and state taxation.
A simple explanation of cost segregation is we provide a compliant Source Document for your Tax Professional that allows them to change your depreciation schedule in a favorable manner for you – bringing you income tax deferral (CASH FLOW) and compliance. We do that by identifying the various components of the building and assigning these components their rightful life and portion of the over-all cost basis. We take items like carpet and floor coverings, molding and millwork, window treatments, wall finishes, etc. and take them out of 39 year depreciation and identify them as 5 year life depreciation.
Components like parking lots and landscaping and drainage can be identified as 15-year property. In the terminology of your accounting professionals, we are reducing 1250 property and putting those asset components in 1245 property and land improvements.
Perkins Financial, LLC, Consultant Representing Cost Segregation Services, Inc., has conducted over 640 projects nationwide since 2010, resulting in over $86,200,000 in deferred income tax.
Here are examples of personal property components with accelerated depreciation lives:
Want to know more? Check out these cost segregation articles:
Recognizing the Value of Next Generation Cost Segregation Studies: Accounting Today
The Best of Both Worlds: Journal of Accountancy
Money Found: Journal of Accountancy
Cost Segregation Applied: Journal of Accountancy