What is Cost Segregation?

Cost Segregation is the process of classifying real property and personal property for acquired or constructed buildings, expansions, renovations, and leasehold improvements to receive tax benefit.  Significant benefit can be achieved by using an engineering approach in carving out costs eligible for a shorter tax recovery period.  The engineering approach relies heavily on professional estimating techniques and utilizing construction drawings and available cost information.

Cost segregation can be applied to current year capital investments as well as previous year investments with a method change.  Various tax acts over the past 10+ years have led to a complex matrix of available applicable rules to apply to capital investments. Currently, 100% bonus depreciation is available to self-constructed and acquired property with costs acquired and placed in service after September 27, 2017.