A Cost segregation Study (CSS) is a strategic tax planning tool that allows property owners to accelerate depreciation deductions, reducing taxable income and increasing cash flow. Here’s who should consider conducting one:
Key Industries That Benefit from Cost Segregation Studies
- Real Estate Developers & Investors – Any commercial real estate owner who constructs, renovates, or acquires property.
- Hospitality & Lodging – Hotels, motels, and resorts can reclassify furniture, fixtures, and improvements for faster depreciation.
- Retail & Shopping Centers – Storefronts, strip malls, and standalone retail locations with significant leasehold improvements.
- Healthcare & Medical Facilities – Hospitals, dental offices, and medical centers with specialized equipment and infrastructure.
- Manufacturing & Industrial Facilities – Factories, warehouses, and distribution centers with heavy machinery and custom-built structures.
- Office Buildings & Corporate Campuses – Tenant improvements and customized office spaces often qualify for accelerated depreciation.
- Restaurants & Food Services – Quick-service and full-service restaurants benefit due to specialized lighting, kitchen equipment, and flooring.
- Multifamily & Apartment Complexes – Owners of rental properties can accelerate depreciation on site improvements and interior components.
- Auto Dealerships & Service Centers – Showrooms, repair shops, and car lots include specialized property elements.
- Self-Storage Facilities – These properties often contain substantial site improvements like fencing, lighting, and paving.
Ideal Property Types for Cost Segregation
- New Construction – Any newly built property where owners can maximize depreciation benefits.
- Acquired Commercial Real Estate – Purchased buildings, even if they have been owned for several years, can undergo a retrospective study.
- Renovated or Expanded Properties – Properties undergoing significant capital improvements qualify.
- Leasehold Improvements – Tenant improvements made by landlords or tenants can be separated for accelerated depreciation.
- 1031 Exchange Properties – Cost segregation can be used post-exchange to maximize tax deferral benefits.
Why Consider a Cost Segregation Study?
- Increases immediate cash flow
- Defers federal and state income taxes
- Reduces tax burden by accelerating depreciation
- Unlocks potential tax refunds via retroactive studies (within IRS guidelines)
Would you like help determining if your specific property qualifies?
