Cost Segregation Services
A Cost Segregation analysis will methodically review property, plant, and equipment and properly reclassify real property (e.g., property that is generally depreciated for tax return purposes over a period of either 27.5 years in the case of a commercial residential apartment building or 39 years in the case of a commercial office building) into personal property (e.g., property that is generally depreciated for tax return purposes over a period of either 3, 5, or 7 years) and land improvements (e.g., property that is generally depreciated for tax return purposes over a period of 15 years) by reviewing all of the structural components within the building structure (e.g., exterior walls, roof, windows, doors, etc.) and the building systems (e.g., lighting, HVAC, plumbing, electrical, escalators, elevators, fire protection, and alarm systems, security systems, gas distribution systems, etc.).
A properly prepared cost segregation analysis entails floor plans and blueprints being meticulously reviewed and site inspections conducted to review the building envelope as part of an engineering-based Cost Segregation analysis to ensure sustainable tax return filing positions per Circular 230.
What Types of Properties are Eligible for a Cost Segregation Analysis?
- New Construction
- Purchased Existing Property
- Renovations or Expansions
- Leasehold Improvements
- Existing Property Placed in Service after 1986
- Real Property “Stepped-Up” Through Estate
What Items Can Be Segregated?
Non-structural items, including specialty lighting, interior decorating, exterior landscaping, and even the labor costs associated with the installation of these items can be reclassified for accelerated depreciation. By segregating these building costs, property owners can realize a faster return on their capital investments.
Industry-Specific Guidance
Some industries have recommendations for the categorization and lives of various assets such as:
- Casinos
- Restaurants
- Retail
- Biotech & pharmaceutical
- Auto dealerships
- Auto manufacturing
At PMBA, we understand your industry and we know what it takes to provide industry-specific guidance.
