Accelerating Depreciation Deductions: A Cost Segregation Study May Reduce Taxes

Businesses that acquire, construct or substantially improve a building — or did so in previous years — should consider a cost segregation study. These studies combine accounting and engineering techniques to identify building costs that are properly allocable to tangible personal property rather than real property. This may allow you to accelerate depreciation deductions, thus reducing taxes and boosting cash flow.

The Basics

IRS rules generally allow you to depreciate commercial buildings over 39 years (27½ years for residential properties). Most times, you will depreciate a building's structural components, such as walls, windows, HVAC systems, plumbing and wiring, along with the building.