Real Estate + Cost Segregation
Depreciation is not just a deduction, it is a timing decision. We model acquisitions, placed-in-service dates and cost segregation before capital is committed, not after the return for that year is already being prepared.
Depreciation is a timing decision, not just a deduction
Commercial and investment real estate depreciates over a long schedule by default, generally 39 years for most commercial property and 27.5 years for residential rental. A cost segregation study breaks a building into its component parts, structural elements, land improvements, personal property, and assigns each the depreciation schedule it actually qualifies for. Several of those components depreciate over 5, 7 or 15 years instead of the default schedule. The building does not change. The timing of the deduction does.
Who this applies to
New acquisitions and property already owned.
Cost segregation is most useful for owners who have income to apply the deduction against, whether from the property itself or from other active income depending on how ownership is structured. It applies to new acquisitions as well as property already owned, and it can be run on a building that has been in service for years through a look-back study. See how a similar sequence played out in an actual engagement.
- Owners acquiring commercial, industrial or larger residential rental property
- Owners who have held property for several years without ever running a cost segregation study
- Businesses planning a build-out, renovation or expansion of owned real estate
- Owners evaluating whether to buy or lease a facility the business occupies
How we model an acquisition
Before capital is committed, not after.
Before capital is committed, we model the acquisition against the depreciation outcome: purchase price allocation, the estimated split between short-life and long-life components, and how the resulting deduction interacts with the owner's broader tax position. This is where the cost segregation decision belongs, before closing, not after the return for that year is already underway. We also model the reverse case, an existing property being evaluated for a look-back study now. Run your own numbers first with the tax projection tool.
Placed-in-service timing and the rules that govern it
One of the few hard facts in this strategy.
Getting placed-in-service timing right, and coordinating it with the rest of the year's tax picture, is part of what a cost segregation engagement has to get right from the start. The same discipline applies to a property moving through a 1031 exchange.
Deduction treatment depends on individual facts and current law, and should be reviewed with the tax and legal professionals responsible for your return.
Where this connects.
Start with the numbers
The first review is free. We will look at your current situation, identify the areas worth modeling, and tell you whether there appears to be a meaningful planning opportunity.