Cost Segregation Articles and Resources
Unlock Tax Benefits Through Accelerated Depreciation
Cost segregation is the only IRS-approved tactic to utilize accelerated depreciation to reduce federal income taxes. Rather than depreciate an entire commercial property all at once, which has a lifetime of 27.5 or even 39 years, a cost segregation study breaks real property into component parts. These short-life items can then be depreciated into lifespans of five, seven, or 15 years. These components include machinery, fencing, parking lots, furnishings, and hundreds more. This can then be used to shield a property owner from federal income taxes.
By applying these methods, investors can reduce federal income tax liability and boost cashflow. Whether you’re managing multifamily properties, commercial buildings, or self-storage facilities, this strategy offers substantial financial benefits.
O’Connor provides expert-led studies that adhere to IRS requirements, ensuring full compliance and defensibility.
Explore Our Most Valuable In-Depth Articles
Our carefully selected articles below cover everything from tax planning to industry-specific applications of accelerated depreciation real estate strategies.
General Tax Strategy & Planning
- Abandonment Study Yields Tax Reduction: Learn how abandonment studies help accelerate depreciation on assets no longer in use, resulting in significant tax deductions.
- Income Tax Reduction Tips for Real Estate Owners: Discover practical tips to reduce income taxes using careful analysis, especially through bonus depreciation eligibility.
- Depreciate Property Improvements Correctly with Cost Segregation: Understand how to assign building improvements to short-lived assets.
- Component Depreciation is Not the Same as Cost Segregation: This article explains the key distinctions between component depreciation and true cost segregation studies, often misunderstood by property owners.
Industry-Specific Resources
- Cost Segregation and Self-Storage Properties: Learn how self-storage owners use these techniques to reclassify units, partitions, and systems for immediate depreciation.
- Cost Segregation and REITs: Improve Financial Results: See how REITs optimize financial performance, and investor returns by implementing a structured analysis.
- Apartment Owners Find Tax Relief: Apartment owners benefit from bonus depreciation and the reclassification of personal property, greatly improving upfront ROI.
- Interior Non-Load-Bearing Walls and Cost Segregation: These interior structures often qualify for accelerated depreciation rental property deductions, creating immediate tax benefits.
Correcting Misconceptions & Missed Opportunities
- Isn’t My CPA Already Doing This?: Most CPAs aren’t conducting the detailed engineering-based studies required by the IRS. Learn why a specialized firm matters.
- Have You Paid Thousands, Even Millions in Unnecessary Income Taxes?: Many investors overlook depreciation deductions. This guide explains how to recapture missed opportunities through a lookback study.
- Cost Segregation: Why Are 90% of Real Estate Investors Overpaying Federal Income Taxes?: Learn why 90% of investors leave money on the table and how a study can change that.
- Alternative Minimum Tax Consequences Are Not a Result of Cost Segregation: Contrary to belief, these techniques do not increase AMT risk. This article dispels that myth with IRS-backed reasoning.
IRS Guidance and Compliance
The IRS Cost Segregation Audit Techniques Guide explains how a study should be run to meet the various requirements of the IRS. Compliance is crucial to withstand scrutiny.
Summary of the Regulatory History
Explore the evolution of these practices, court rulings, and IRS adoption of engineering-based methodologies.
IRS Audit Techniques Guide
This comprehensive guide includes:
- Legal framework and depreciation rules
- Acceptable methodologies
- Required documentation for a quality study
- Uniform capitalization and change in accounting method
- IRS expectations for audit-ready reports
Industry-Specific IRS Guidance
The IRS provides specific audit focus on:
- Casinos
- Restaurants
- Retail industries
- Biotech/pharmaceutical properties
Knowing what documentation is required can help you prepare for compliance and avoid red flags.
Frequently Asked Questions
By allowing faster asset write-offs, it reduces taxable income, especially beneficial during the first few years of ownership.
Recent legislation has restored bonus depreciation to its previous glory. Sunsetting has been stopped and 100% bonus depreciation in year-one is once again an option.
No. It benefits residential rental properties too—especially when applying accelerated depreciation rental property strategies.
Absolutely. The IRS has stringent rules that must be upheld at every step of the study.
