Cost segregation, which may be deductible as a business expense, is the process of identifying, segregating, and reclassifying components of commercial property into shorter depreciable tax lives. A core benefit of commissioning such a study is the additional cash flow created by reducing an owner’s current taxable income. To some extent, cost segregation studies are viewed as long-term, no-interest loans from the Federal government.

There are a number of factors to consider when determining the relative value of having a cost segregation study performed. These factors include an owner’s tax status, building type and use, and cost of the study. Ideally, a cost segregation study will provide a good ratio of study cost to tax savings while meeting all of the IRS requirements.