Top Ten Questions on Cost Segregation

Tuesday, May 22, 2018 by Len Berkowitz


1.   What is a Cost Segregation Study?

A cost segregation study is an engineering based study which analyzes real estate assets to identify any tangible personal property that is eligible for accelerated depreciation.


2.    What does that mean?

By conducting this study, a property owner who would normally depreciate his real estate over 27.5 or 39 years,. can identify assets that qualify for a shorter depreciation period (and an accelerated depreciation method) allowing him to frontload his tax deductions and increase  cash flow.


3.   What’s  the catch?

There really is no “catch”. Provided the study is done in accordance with IRS guidelines, the property owner should be able to realize the benefits.


4.  Can I do the study myself?

Although property owners may be able to identify certain obvious assets that qualify for a shorter depreciation periods (such as light fixtures and carpeting), other not as obvious  items will likely be overlooked.

In addition, the IRS has provided detailed guidelines and requirements in order to qualify for these benefits making it difficult for untrained professionals to comply.


5.  What type of property qualifies for these benefits?

Almost any commercial or residential property qualifies.


6.       Who can benefit from this study?

Any property owner who has recently purchased, improved or developed a property, one who owns a property for which a study has not yet been performed, and lessees who make leasehold improvements.


7.   So if I bought my property five  years ago I can still do this study?

Yes! A study can be performed at any time, and the depreciation adjustment is then realized in the current year.


8.   Exactly what kind of benefits will I get from my cost segregation study?

Before performing a study, we will prepare an estimate of benefits so you can get an idea of what the benefits will be. As a general rule, property owners can expect net present value savings of $15,000-$20,000 for every $100,000 worth of assets reclassified to a shorter depreciation period.


9.   How much does a study cost?

The cost of a study varies from property to property. On average a study is between $5,000-$15,000. However smaller and larger properties can fall outside this range.


10.  Why Should I use Riverside TACS?

Riverside TACS’ cost segregation professionals have conducted thousands of studies and are leaders in this field. Riverside TACS will provide you with the same high quality service you have come to expect from Riverside Abstract and Riverside 1031. Contact us at 718.215.5168 or to learn more about how we can help you save.