Cost Segregation is a tax strategy that allows property owners to increase cash flow by accelerating depreciation deductions on certain components of a property.
This process involves identifying and separating the costs of personal property from the costs of real property. By categorizing assets such as fixtures, equipment, and land improvements into shorter depreciation schedules, taxpayers can benefit from enhanced tax deductions in the early years of property ownership.
For example, a commercial building may have a 39-year depreciation schedule under standard real property rules, but through cost segregation, components like lighting, carpeting, and landscaping can be depreciated over 5, 7, or 15 years, leading to significant tax savings and improved cash flow.
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