1. Accelerated Depreciation
- Cost segregation identifies components of a property that can be depreciated over shorter periods (e.g., 5, 7, or 15 years) instead of the standard 27.5 years (residential) or 39 years (commercial).
- This accelerates tax deductions, allowing property owners to claim more depreciation earlier in the asset’s life.
2. Improved Cash Flow
- By deferring tax payments through larger early depreciation deductions, property owners can keep more cash available for reinvestment, operations, or other expenses.
3. Reduced Tax Liability
- Accelerated deductions reduce taxable income in the early years of property ownership, which can lower overall tax obligations and provide significant savings.
4. Eligibility for Bonus Depreciation
- Assets identified in a cost segregation study may qualify for bonus depreciation (e.g., 100% for certain assets), enabling substantial first-year tax savings.
- This is particularly beneficial for new property acquisitions or major improvements.
5. Higher Return on Investment
- Enhanced cash flow and reduced tax liabilities can boost overall ROI, making investments in real estate more financially attractive.
6. Tax-Deferred Benefits
- The tax savings generated through cost segregation can be reinvested, compounding the benefits of the strategy over time.
7. Strategic Advantage for Property Sales
- Cost segregation helps adjust the tax basis of assets, potentially reducing recapture taxes upon sale and facilitating better tax planning.
8. Applicable to Various Property Types
- Cost segregation applies to a wide range of properties, including residential rentals, commercial buildings, manufacturing facilities, and retail spaces.