Real Estate
Cost Segregation
By Ryan M. Hoback
04/03/06, 02:17

Cost Segregation is a strategic tax savings’ tool that allows companies and individuals who have constructed, purchased, expanded, or remodeled real estate to increase their cash flow by accelerating depreciation deductions and deferring their federal and state income taxes.

The goal of a Cost Segregation study is to identify, segregate, and reclassify project-related costs that are currently classified as real property to shorter depreciable tax lives for federal and state income tax purposes. Recent IRS rulings and procedures have allowed taxpayers to change accounting methods to take advantage of these previously understated depreciation expenses--back to 1987. This is done without amending tax returns.

Cost Segregation started in the 1960’s and has been called component depreciation studies, investment tax credit studies and various other names. No matter what name you use--Cost Segregation can save you tax dollars and increase your cash flow. There are over 300 court cases and I.R.S. rulings supporting the benefits of Cost Segregation.

The bottom line...Cost Segregation increases your cash flow.