Do you own commercial real estate? Have you heard of a cost segregation study? It’s a great way to save money on your taxes using your commercial real estate. 

There's a reason that every mega-rich person you can think of is heavily invested in real estate. Revenue streams aside, there are some major perks to getting into commercial property. One of those perks can be found in the handy-dandy IRS Tax Code. It's called a Cost Segregation Study.

Cost segregation is a way that the IRS allows you to write off your building’s depreciation more quickly than the standard - normally, a building may be depreciated over 39 years. In contrast, a Cost Segregation Study may allow you to expense the building components as quickly as 5, 7, or 15 years. This is because materials like brick, glass, stone and steel all depreciate at different rates. Breaking down the components of your building can save you money. A Cost Seg study allows you to front-load the depreciation of of these components, meaning you don't have to wait nearly 40 years to realize the full deduction benefits of your space.

But it’s easier than it sounds! Here's how it works: A specialized firm will send an engineer to your building to begin the study. They will inspect all the physical components of the building (land not included), determine the cost of those components, and then break down the depreciation of the assets according to the IRS sanctioned schedule. This information goes into a report that is attached to your tax return. The resulting deduction is often hundreds of thousands of dollars. We've had numerous clients effectively wipe out all of their taxable income for the given year just by having a study conducted on their space.



Another key component to the Cost Segregation benefit is the concept that a dollar today is worth more than a dollar in the future. The Cost Segregation study allows you to reap future tax benefits at the same rate but now instead of in the future.   

Of course, you will need to work with a qualified firm that is experienced in the ins and outs of cost segregation. They can provide the right engineers with the right expertise. You’ll need more than rough estimates here. Want help finding a qualified firm? Let us know and we can put you in touch with a trusted provider.