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Cost segregation
Accelerated Depreciation
The primary purpose of a cost segregation study is to identify portions of your real property that may qualify for a shorter tax life. Most real property can be depreciated over a straight-line recovery period of 27.5 or 39 years. The Internal Revenue Service (IRS) allows building owners an opportunity for accelerated depreciation by utilizing the Modified Accelerated Cost Recovery System (MACRS) to depreciate certain land improvements and personal property over shorter lives. Certain land improvements can be depreciated over 15-years at a 150% declining balance, with certain personal property depreciated over 7 or 5 years at a 200% declining balance. Identifying assets that can be depreciated over a shorter life can have a significant positive impact on a company’s cash flow.
Bonus Depreciation
The reclassification of assets from longer to shorter tax recovery periods may also make these assets eligible for bonus depreciation resulting in even more substantial present value tax savings, especially with full expensing for qualified property placed in service after September 27, 2017.