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What is Cost Segregation

What is Cost Segregation

Cost segregation is a tool for tax planning that is commonly used by commercial property owners. Using cost segregation allows an individual to view how quickly a property depreciates, therefore allowing owners to reduce the amount of taxes owed. In order for taxes to be reduced, a cost segregation study must occur. During a cost segregation study, the property is observed for parts that qualify for a shorter recovery period. Once these parts of the property are identified, they are qualified and classified to produce additional depreciation deductions. These deductions result in a reduced amount of taxes owed. This is a widely used method of depreciation to increase a property’s cash flow.

Key Points

  • Accelerated depreciation of property
  • Decreases amount of taxes owed
  • Common method of depreciation
  •  ncreases cash flow

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