What is Cost Segregation?
Cost Segregation is a little known tax strategy for people who own commercial property. When you purchase a commercial property, the standard process is to depreciate it over 39 years. That means instead of taking the purchase price all at once, you must deduct 1/39 of the cost every year for 39 years.
Cost Segregation allows the owner of the building to divide the building into the various components. Instead of depreciating the entire building for 39 years, some parts are depreciated over less years. For example, floor coverings would be depreciated over 5 years instead of 39 years.
By breaking down the components and depreciating each by how long they really last, you can deduct a larger amount each year and as you replace items, you can depreciate them over the shorter period of time. This is a great way to save on your taxes.
We can help you set up cost segregation the maximize your deductions.