Cost Segregation (US)

The US tax code, while standardizing the depreciation of real estate over a 39-year period, provides the opportunity to carefully itemize certain aspects of the real estate that may be more appropriately defined as personal property. Non-structural items, including specialty lighting, interior decorating, exterior landscaping—even the labor costs associated with the installation of these items—can be reclassified for accelerated depreciation. By segregating these building costs, property owners can realize a faster return on their capital investments. Highly customized building applications, including research centers, manufacturers, restaurants and hotel uses may find substantial percentages of their projects advance from 39-year to five-or seven-year depreciation schedules. The result? Immediate tax benefits.

Any building in the United States currently under construction or remodeled since 1987 may be eligible. For cost/benefit purposes, an analysis makes sense for buildings valued at a minimum of $1 million. Since depreciation is an offset on your taxable income, the entity must be reporting a profit to benefit.

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