What is Cost Segregation — and Why It Matters for Real Estate Professionals
For real estate investors, developers, and property managers, depreciation is a cornerstone of tax planning. Traditionally, commercial properties are depreciated over 39 years, and residential rental properties over 27.5 years.
Cost Segregation redefines this timeline by identifying and reclassifying certain building components into shorter recovery periods (5, 7, or 15 years) as permitted under IRS guidelines.
This acceleration allows owners to:
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Increase current deductions
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Enhance cash flow
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Maximize after-tax returns
In short, Cost Segregation transforms a long-term tax advantage into immediate financial impact — fueling reinvestment, acquisition, and growth.
Real vs. Personal Property: The Core of Cost Segregation
The success of a Cost Segregation study depends on accurately distinguishing between real property and personal property. This classification determines how quickly assets can be depreciated.
An asset is generally considered personal property if:
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It can be removed without damaging the building’s structure.
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Its function is closely related to equipment or machinery, and both would likely be retired together.
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It has a unique relationship to the business operations conducted within the property.
By identifying these assets, such as specialized lighting, flooring, or electrical systems, real estate owners can accelerate deductions and significantly reduce taxable income.
Additional Benefits of Cost Segregation
Beyond accelerating depreciation, Cost Segregation unlocks multiple strategic advantages for real estate professionals:
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Bonus Depreciation: Enables immediate first-year deductions for qualifying property.
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Catch-Up Depreciation: Allows taxpayers to claim missed depreciation from prior years without amending past returns.
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Reduced Depreciation Recapture: Helps minimize taxable gains when assets are sold.
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Partial Dispositions: Permits write-offs for components replaced during renovations or upgrades.
Each of these benefits enhances return on investment and strengthens overall tax efficiency.
Bonus Depreciation: A Valuable Tool for Real Estate Investors
Bonus Depreciation allows an immediate deduction for eligible property in the year it’s placed in service, providing a powerful boost to early cash flow.
To qualify, assets must:
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Have a recovery period of 20 years or less, and
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Be new or newly acquired for business or investment use.
The percentage of available bonus depreciation depends on the year the asset was placed in service, making timing an essential element of tax strategy.
Partner with Ayming USA to Maximize Your Real Estate ROI
With decades of experience in tax optimization, Ayming USA combines deep engineering expertise and tax insight to deliver accurate, defensible Cost Segregation studies tailored to the real estate sector.
Whether you manage multifamily properties, commercial portfolios, or development projects, our specialists help you:
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Identify eligible assets
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Accelerate depreciation
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Maximize deductions
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Unlock meaningful cash flow
Discover how Ayming USA can help you leverage Cost Segregation to its fullest potential.
