• Companies specializing in cost segregation studies can help developers show potential equity investors how their returns can be maximized before they invest
• Cost segregation front-ends tax losses by classifying everything in the building: chattels, carpet, light fixtures, etc., and assigning an economic life to them, and then amortizing each of them over that life
• Land is excluded and is not depreciable
• Different categories of assets may be depreciated over 5, 7, 15, 25, or 39 years
• Savings can be reinvested in other real estate ventures, by rolling them forward into new deals
• This cost segregation strategy can be employed by individuals, estates, corporations, partnerships, and LLCs
• There was a special limited-term act passed in 2017 called “Bonus Depreciation” that increased benefits to property owners even more than the basic Act allowing cost segregation which was passed in 1987
• The age of the building does not matter-what does is the year in which it is acquired-cost segregation can begin then on it and on capital improvements
installed by the new owner-so the formula becomes: Buy, Renovate, Hold for appreciation, and Sell
• Cost segregation can even be applied retroactively on a building some years following its acquisition
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