How It Works
A cost segregation study breaks down the components of a building and reclassifies them from 39-year (commercial) or 27.5-year (residential) property into 5, 7, or 15-year property. This accelerates depreciation deductions, creating significant tax savings in the early years of ownership. Combined with bonus depreciation, this can result in massive first-year deductions.
Who Qualifies
- Commercial property owners
- Residential rental property owners
- Recent purchasers or new construction
- Properties valued at $500K+
Key Requirements
- Engineering-based cost segregation study
- Detailed asset classification
- Property must be in service
- May require Form 3115 for change in accounting method
Documentation Needed
Cost segregation study from qualified engineer, purchase documents, construction contracts, Form 3115 if applicable.