Cost segregation services can provide significant cash flow benefits to taxpayers through accelerated tax depreciation. Often, taxpayers book asset acquisitions (new construction, renovations, acquisitions, etc.) based on GAAP and report such amounts for federal income tax purposes. However, federal income taxes can be minimized by properly segregating assets between non-residential real property (39-year life property) and personal property (5-, 7- and 15-year life property).

A detailed cost segregation review involves analyzing the asset components of a construction project (e.g., electrical wiring, lighting, flooring, etc.) to determine the costs that qualify for a shorter recovery period. Depending on the type of building or project, a cost segregation study can result in a reclassification from 10% to over 40% of a building’s construction cost. Sample cash flow benefits include:

• For every $1M re-classed from 39 yrs. to 7 years, the NPV tax benefits approximate $275,000.
• For every $1M re-classed from 39 yrs. to 5 years, the NPV tax benefits approximate $300,000.
• For every $1M re-classed from 15 yrs. to 7 years, the NPV tax benefits approximate $100,000.
• For every $1M re-classed from 15 yrs. to 5 years, the NPV tax benefits approximate $125,000.