Decreased Tax Liability for Real Estate Owners
Cost Segregation is an IRS-recognized benefit strategy that helps real estate owners accelerate depreciation deductions, taking advantage of the time value of money.
In a Cost Segregation Study, specific components of a property are identified and “segregated” into categories based on Modified Cost Recovery System (MACRS) class lives.
If no Cost Segregation study is performed, assets in a commercial property will depreciate over 39 years, with residential rental property assets depreciating over 27.5 years. When a Cost Segregation study is performed, a trained engineer can carve out shorter-lived assets, and move them to other MACRS class lives:
“Accelerating” the depreciation of these assets results in decreased tax burden and increased cash flow.
If no Cost Segregation study is performed, all assets in a commercial property will depreciate over 39 years, with residential rental property assets depreciating over 27.5 years. When a Cost Segregation study is performed, a trained engineer can carve out shorter-lived assets, and move them to other MACRS class lives: • Personal property assets depreciate over 5 or 7 years • Land improvements depreciate over 15 years “Accelerating” the depreciation of these assets results in decreased tax burden and increased cash flow.
Cost Segregation provides immediate benefits – decreased tax liability and freed-up capital that can be strategically reinvested.
Cost Segregation also sets the stage for future savings, as the data it provides support a host of related strategies.
Keep in mind that Cost Segregation does not create new deductions, but accelerates them, taking advantage of the time value of money.
In general, for every $1,000,000 invested into a property, accelerated depreciation can create $30,000-$200,000 in federal tax benefits. It depends on what fraction of assets were able to be accelerated, and that will vary based on a host of factors including property type, location, and depreciable basis.
The Walz Group will assess your situation and provide a no-cost Estimate of Benefits to give you a better idea of your potential scope of savings.
Cost Segregation Studies bring benefit throughout a property’s life – after construction or acquisition, in a renovation scenario, or before remodeling.
Ideally, a study should be performed as soon as possible after a property is placed-in-service, to maximize tax savings from day 1. If that wasn’t possible, the IRS does permit “look-back” studies that allow taxpayers to recoup the benefit they would have gained had they performed the study sooner.
Doing a detailed study of assets you’re about to retire does seem strange. However, if these assets are quantified via Cost Segregation Study before they are removed from service, you can write off their remaining depreciable basis under a Partial Disposition Election. This can be a lucrative strategy, but you must have a complete record of the assets in question.
A Cost Segregation Study can be performed on virtually any type of real estate, though some verticals tend to be particularly strong candidates: • Manufacturing/Industrial Facilities • Multifamily • Auto Dealerships • Medical facilities • Self Storage facilities
Properties with a depreciable basis of $1,000,000+, or renovations in excess of $300,000, generally yield favorable results.
The Walz Group is here to help assess your property, estimate your potential benefit, and walk you through the process. If you decide to move forward, we’ll do the heavy lifting, minimizing the time burden while maximizing the benefit. We are built to be your partner. You’ll have a proactive team in your corner year after year, helping you plan ahead and make smarter tax decisions as your business grows.
Below you will be able to browse our downloadable guides, checklists, and quick facts for practical insights you can use right away. Then reach out if you’d like help applying them to your specific situation.
A cost segregation study doesn’t have to be complicated. Our team walks you through each step of the process from initial review to final results with clear communication and minimal disruption. The focus is on identifying opportunities, gathering the right information, and helping you make informed tax planning decisions with confidence.
Real estate tax planning can involve many moving pieces. This checklist outlines key incentives, elections, and strategies to help ensure no potential opportunity is overlooked. From expensing and depreciation options to energy credits and state-specific incentives, this resource is designed to support informed discussions and proactive planning.
Manufacturing facilities often have unique assets that may qualify for cost segregation benefits. Review industry-specific examples to understand how these studies work and where opportunities may exist.
Cost Segregation 101 is a quick, practical guide to what’s eligible for cost segregation and which building components may qualify for shorter depreciable lives. Helping you accelerate deductions, understand bonus depreciation rates, and identify property types that may benefit from this favorable tax strategy.
For multifamily owners, cost segregation can help unlock faster depreciation on assets throughout the property, such as site improvements, common areas, and in-unit components, potentially improving cash flow in the early years of ownership. Explore where multifamily projects often see the biggest opportunities.
Cost segregation can be especially valuable for medical and dental offices, where specialized buildouts often include components that may qualify for shorter depreciable lives. See common examples, like cabinetry, plumbing and electrical upgrades, specialty lighting, and certain interior finishes, that can help accelerate deductions.
