Under United States tax laws and accounting rules, cost segregation is the process of identifying and segregating personal property assets from real property assets for tax reporting purposes.  Cost segregation is performed to reduce federal income taxes for owners of commercial or multi-family real estate by correctly calculating real estate depreciation.  Through cost segregation, the components of a building are reclassified into proper class lives according to the provisions of MACRS (Modified Accelerated Cost Recovery System), under the Tax Reform Act of 1986.


When building and land improvements are depreciated over 5, 7, 15, and 27.5 or 39 years rather than just 27.5 or 39 years, the depreciation becomes accelerated for shorter-lived items by reducing the asset’s tax life.  The increased annual depreciation can have a positive effect for clients by reducing their federal income taxes.


Cost segregation studies can be performed on real estate acquisitions, new construction, and leasehold improvements.  Clients can also benefit from a properly documented cost segregation analysis because it creates an audit trail, helping to resolve IRS inquiries during the early stages of an audit.


Our strategic partners have extensive experience with cost segregation analyses, many involving high-profile properties.  We have the expertise to advise and assist you in potentially realizing significant savings in federal income taxes.

Liberty Valuation Group, LLC
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