Cost Segregation examines the costs included in a real estate structure to qualify them for a faster tax depreciation write-off than the 39 years normally assigned to commercial property. What can be classified as a land improvement can be depreciated over 15 years, and what is classified as personal property, over 7 or 5 years.
Assuming a 40% combined federal and local income tax rate and a 6% discount factor, classifying $100,000 in construction costs from 39 years to the alternatives below will create the following present value savings:
|15 Years||$ 12,020|
|7 Years||$ 18,830|
|5 Years||$ 20,040|
Taxpaying entities with business or investment real estate with a cost, excluding land, of $750,000 or more,
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