Cost segregation is a study that reclassifies building components into shorter depreciation periods (5, 7, or 15 years instead of 27.5 years). This accelerates depreciation deductions, significantly reducing taxable income in the early years of ownership. A study typically costs $5,000 to $15,000.
How It Works
Engineering study identifies building components that can be depreciated faster than the building itself.
Depreciation Acceleration
5-15 year depreciation vs 27.5 years for residential rental. Increases early-year deductions.
Tax Savings
Can save thousands in taxes annually. Often pays for itself in the first year.
Cost of Study
$5,000-$15,000 depending on property size and complexity.
Who Should Do It
Investors who plan to hold properties long-term. Most beneficial for properties over $500,000.