What Is Cost Segregation?

Cost segregation is an IRS approved process for accelerating the depreciation of fixed assets to minimize tax exposure and to maximize cash flow. The cost basis for each component of a property is identified and then properly classified in the correct depreciation category – 5, 7, 15, 27.5 or 39 years.

On average 20% – 40% of a fixed asset may be classified to a shorter life than 39 years.  Accelerating these expenses into the current tax year enables these expenses to offset current revenues and reduce income taxes. Most CPAs do not have the IRS required engineering/construction expertise and credentials to itemize 100% of the property, thereby taking full advantage of what the IRS allows.