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Tax Benefits for Developers: Cost Segregation Study (Video)

Posted by Andy Kahn on Thu, May 17, 2018

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Did you incur costs during the building and construction or purchase of your facility? You can likely accelerate some deductions with a cost segregation study, an engineering-based analysis of the costs associated with the acquisition, construction, or renovation of a building.

Watch the video below, or read on for more information:


A cost segregation study is an engineering study done on a property that is either just recently been built or purchased – or even one that was purchased or built 15 years ago.

The idea is – if you do not do a study – the components of the property get split into two pieces, land and building. And unfortunately, that building piece has to be depreciated over a 39-year time frame.

New Call-to-action With a cost segregation study, those components get several additional pieces added in, which are:

  • A 5-year component,
  • A 7-year component, and
  • A 15-year component.

The result would be an acceleration of your depreciation deductions, which then:

  • Reduces your current taxes,
  • Increases your cash flow, and
  • Puts money in your pocket that you can use to either pay down debt or invest back into the business.

READ MORE: Like-Kind Exchanges: What Real Estate Investors Need to Know

There are likely many businesses that are missing out on the opportunity to conduct a cost segregation study. Many people probably don't know the existence or the benefits of it. It originally was a benefit to only very large companies, but when the tax laws changed, the benefit also trickled down to mid-size and smaller companies.

If somebody has paid more than $1 million to construct or purchase a property, and they've done it within the last 15 years, they should strongly consider looking at an analysis of whether or not there would be a benefit in going forward with a study.

For example, we recently completed a cost segregation project on a client’s new facility. The cost of the facility was in the neighborhood of $15 million, and we were able to get in excess of $3 million of depreciation expense in the first year.

I believe the benefit to cost ratio there was over 30-to-1. That’s an example of a very good return. 

Could a cost segregation study benefit you? Contact Andy Kahn at akahn@concannonmiller.com or 610-433-5501 for a free 30-minute consultation.

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Topics: Construction & Real Estate Development

Concannon Miller’s unique, holistic and intimate approach to financial health sets us apart from smaller CPA firms with more limited resources as well as mega firms where mid-sized clients struggle for attention. Contact us here to talk about improving your business.

This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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