Article Date:
August 2007

Word Count:



Add to Your Net Worth with Cost Segregation

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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