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ARTICLE · 27 MAY 2025

What Is A Cost Segregation Study In Real Estate?

Kaufman Rossin
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Real estate investors often seek to reduce their taxable income in any way possible, so they can invest those funds in either new properties or improvements on those they currently own.

United StatesReal Estate and Construction
Louis Guay
Louis Guay

Real estate investors often seek to reduce their taxable income in any way possible, so they can invest those funds in either new properties or improvements on those they currently own. A cost segregation study, conducted by engineers and tax professionals, can help investors assess the depreciation of their investments in detail to maximize tax savings. While they may not be the right move for every investor — and there is some risk involved — these analyses can be a helpful way of reducing taxes for property buyers and owners.

Definition of cost segregation

Cost segregation is a strategy used by real estate investors to recover depreciated property costs. While property depreciation is tax-deductible over time, the IRS acknowledges that certain parts of a building may deteriorate more quickly than the building as a whole. Cost segregation accelerates this fiscal depreciation process for certain elements of a property, freeing up capital and increasing cash flow

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