How the Technique Works

The process of cost segregation begins at the time of purchase. Accounting professionals should advise clients or employers buying real estate to use an engineering report to segregate assets into four categories. This article focuses on cost segregation for buildings.

The building. Buyers should attempt to maximize a building’s value; any residual value will be allocated to nondepreciable land. Although a building’s separate components (such as its roof) all are considered part of the building itself, there is merit to valuing and depreciating each component separately (albeit, on the same depreciation schedule). This way, if one of the building’s components subsequently becomes worthless, the taxpayer can write it off immediately.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

2 Responses to “Cost Segregation – A Tax Savings Tool – 4”

1. Rose Glen says:

   November 13, 2009 at 12:59 pm

   Great! Each building component depreciates at a different rate than the others and has to be assessed differently from one another. This makes a lot of sense.
2. Todd Strumpfer says:

   November 13, 2009 at 9:57 pm

   Cost Segregation is an IRS-approved method to increase your deductions for depreciation which reduces your taxes. This will reduce your taxes by approx. $35,000 for every $500 K you have in building costs (or purchase price). This is for existing property or new construction. This is something that most CPAs know about but don’t do for their clients because they don’t have the engineers and expertise on staff to do it. We can do a free analysis so you will see the financial benefit in your situation. Contact us at 888-303-4874 or todd.strumpfer@costsegserve.com

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