Cost-Segregation Study Importance. A cost-segregation study is an engineering study you can have done on either residential or commercial property, that divides up the building components into different depreciation lives.
This is important is because it allows you to take more depreciation in earlier years, as opposed to if you just use the standard depreciation lives (27.5 years for residential and 39 years for commercial).
It’s a bad idea to do your own cost-segregation study since it will be difficult to have the supporting evidence to justify why you decided to allocate the assets and depreciation a certain way. An actual engineering study will provide the supporting evidence needed to take this deduction (some start as low as $1,500 for a simple residential building).
We have seen where a client was able to do this on a residential rental property and claim an additional $100k in depreciation to the current year, which saved them roughly $30k in taxes, so the $1,500 was well spent.
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