Thousands of commercial property owners overpay federal income tax every year because they are missing out on allowable depreciation expense deductions. Ironically, these accelerated depreciation expense deductions are readily available to all federal taxpayers under existing IRS tax laws. However, without an engineering-based cost segregation analysis, the taxpayer is unable to take full advantage of the tax law, thus foregoing the significant cash flow remitted to the IRS each year!

Depreciation continues to be one of the most significant opportunities to reduce your federal tax burden. Without cost segregation or purchase price allocation, however, many companies fail to fully capture these benefits. A cost segregation analysis breaks down construction and acquisition costs and allocates them to specific categories: tangible personal property, land improvements and real property.

In the absence of a cost segregation study, for example, it is difficult for a company to separate all of the personal property and land improvement costs, as well as indirect costs, from the total cost of the building. The result – all such property is subject to 39-year straight-line depreciation (27.5 years for residential property) – and a substantially higher tax bill.