Cost Segregation

Flagel Huber Flagel can assist clients in generating significant tax savings and cash flow with a cost segregation study. Cost segregation is a simple but powerful technique to maximize depreciation deductions on real estate owned. Cost segregation, performed through a professional study by Flagel Huber Flagel where current laws and regulations are employed, is fully sanctioned by the Internal Revenue Service.

Our Approach
Buildings generally must be depreciated over 39 years for nonresidential property and 27.5 years for residential property. However, almost all properties contain significant amounts of personal property (5 or 7 year life) and land improvements (15 year life).  Virtually any kind of real estate owned is a candidate for a cost segregation study.  Examples of eligible properties include:

  • Newly constructed buildings and renovations
  • Purchases of existing buildings
  • Leasehold improvements owned by either the landlord or tenant
  • Existing buildings presently owned that were acquired in the past

By carving out the maximum amount of such components with shorter depreciation lives with a detailed, engineered study, we are able to generate significant tax savings and cash flow for you.

Even if you have been depreciating your building over 27.5 or 39 years, it is not too late.  The IRS allows all of the additional depreciation that was missed over the years to be deducted, all at once in the current year of the study.

Your Savings
Results vary with each property, but present value of the tax savings is typically 5% of the building’s cost, with most of that savings realized in the first few years. That would be a savings of $50,000 for every $1 million of building cost; this is merely a rough benchmark. In addition, removing the personal property components from the real property can, depending on the jurisdiction, reduce the real property’s value for property tax and transfer tax purposes.  Prior to any cost segregation study decision, a cost-benefit analysis should be completed. Contact us today so that we can calculate a more detailed estimate of your potential tax savings.

Our Tax Team
Bruce G. Kreinbrink, CPA, CFP, Partner
James R. Hochwalt, CPA, ABV, FACFA, FACFEI, CFF, Partner
Jeffrey M. Woeste, CPA, Partner
Linda B. Hadley, CPA, MBA, Manager