A cost segregation study is an
engineering study done on a property
that has either just recently been built
or purchased, or even one that was
purchased or built 15 years ago. The idea
is that if you do not do a study,
the components of the property get
split into two pieces land and building.
And unfortunately, that building piece
has to be depreciated over a 39-year
time frame. With a cost segregation study,
those components get several additional
pieces added in, which is a five-year
component, a seven-year component, and a
15-year component, which the result would
be an acceleration of your depreciation
deductions, which again then reduces your
current taxes, increases your cash flow
and puts money in your pocket that you
can use to either pay down debt or
invest back into the business. There are
likely many businesses that
are missing out on the opportunity to
conduct a cost segregation study. Many
people probably don't know the
existence of it, or the benefits of it. It
originally was a benefit to only very
large companies but when the tax laws
changed, the benefit also then trickles
down to mid-sized and smaller companies.
And if somebody has paid more than a
million dollars to construct or purchase
a property, and they've done it within
the last 15 years, they should strongly
consider looking at an analysis of
whether or not there would be a
benefit going forward with a study. For
example, we recently completed a cost
segment project on a client's new
facility. The cost of the facility was in
a neighborhood of 15 million dollars and
we were able to get an excess of 3
million dollars of depreciation expense
in the first year, and I believe the
benefit-to-cost ratio there was over 30
-to-1 - that's an example of a very good
return.
[Music]
