A Cost Segregation analysis will methodically review property, plant and equipment and properly reclassify real property (e.g., property that is generally depreciated for tax return purposes over a period of either 27.5 years in the case of a commercial residential apartment buildings or 39 years in the case of a commercial office buildings) into personal property (e.g., property that is generally depreciated for tax return purposes over a period of either 3, 5, or 7 years) and land improvements (e.g., property that is generally depreciated for tax return purposes over a period of 15 years) by reviewing all of the structural components within the building structure (e.g., exterior walls, roof, windows, doors, etc.) and the building systems (e.g., lighting, HVAC, plumbing, electrical, escalators, elevators, fire protection and alarm systems, security systems, gas distribution systems, etc.). A properly prepared cost segregation analysis entails floor plans and blueprints being meticulously reviewed and site inspections conducted to review the building envelope as part of an engineering-based Cost Segregation analysis to ensure sustainable tax return filing positions per Circular 230.
What Types of Properties are Eligible for a Cost Segregation Analysis?
- New Construction
- Purchased Existing Property
- Renovations or Expansions
- Leasehold Improvements
- Existing Property Placed in Service after 1986
- Real Property “Stepped-Up” Through Estate
What Items Can Be Segregated?
Non-structural items, including specialty lighting, interior decorating, exterior landscaping and even the labor costs associated with the installation of these items can be reclassified for accelerated depreciation. By segregating these building costs, property owners can realize a faster return on their capital investments.
Industry Specific Guidance
Some industries have recommendations for categorization and lives of various assets.
Our Cost Segregation Process
- Complete a preliminary review to quantify the benefits of a study
- Gather basic information about the property such as building and component engineering drawings
- Determine if an in-depth review will yield a significant enough result to warrant the expense of analysis
- Discuss the review, present findings and fee estimate
- Supply a detailed report of estimate and actual costs
- Site visit and review made by a PM Business Advisory Expert
- Work with collaborative architectural engineering professionals to assemble data and allocate costs
- Assign proper classification of your assets
- Deliver a carefully prepared comprehensive report as part of our review meeting