Good tax planning tells you to accelerate your deductions and defer your income. Cost segregation can add tremendous acceleration to the depreciation deductions you claim on a building. That puts money in your pocket.
Imagine the acceleration in your depreciation deductions if 30% of your buildings could be depreciated using 5-year depreciation rather than 27.5- or 39-year depreciation. The 5-year plan is almost eight times faster than the 39-year plan.
This can happen for you right now. It can happen with a building you already own and have owned for some time. It can happen with a building you plan to buy. It can happen with a renovation you are about to undertake.
The purpose of this article is to expose you to “cost segregation,” which allows you to segregate a building into two components: personal property and land improvement. When you apply the cost segregation strategy, you realize deductions faster. Considering the time-value of money, you are adding dollars to your net worth.
One study we reviewed describes a $10 million building that segregated into
$2 million of equipment (20%);
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