Understanding Cost Segregation

The subject of this example is a medical/general office area on two floors which consists of approximately 18,000 finished square feet. The property was constructed with wood-framed walls and a brick facade with wood joist roof framing.  The exterior of the property includes typical improvements such as lighting, signage, asphalt paving, sidewalks, and curbing.

This example property was purchased and structures were built in 2004 and 2012 by the current owner. Once reviewed, our experts were able to make the following determinations:

Original Tax Filing:
39 Year Life – $2,605,000
15 Year Life – $94,000
7 Year Life – $22,000

Total Cost Value – $2,721,000

Revised Tax Filing:
39 Year Life – $2,130,000
15 Year Life – $194,600
7 Year Life – $340,000
5 Year Life – $56,400

Total Cost Value – $2,721,000

Total Net Tax Benefit = $83,000

The final report allowed the taxpayer to deduct almost $300,000 more in “catch up” depreciation in one year.