Is Your Property a Good Fit For Cost Segregation Studies?
Cost segregation services are used by a wide range of property owners and investors, from large corporations to individuals with single rental properties, who want to accelerate depreciation deductions to improve cash flow. Virtually every type of income-producing real estate can be a candidate for a cost segregation study. The following property types are commonly mentioned by service providers as strong candidates:
The decision to proceed with a cost segregation study is ultimately an investment calculation. Traditionally, this strategy is recommended for properties with a depreciable basis exceeding $300,000 to ensure the savings outweigh the cost. USTAGI challenges this convention by offering affordable, high-quality studies that make financial sense for a wider range of investors. We are proud that our efficient model allows most small business owners to benefit from our expertise for under $1,000.
Hotels, motels, and resorts
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Shopping centers, restaurants, and grocery stores
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Manufacturing facilities, warehouses, and biotech plants
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Apartment complexes
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Nursing homes
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Self-storage facilities, car washes, gas stations, and agricultural facilities
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Hotels, motels, and resorts | Shopping centers, restaurants, and grocery stores | Manufacturing facilities, warehouses, and biotech plants | Apartment complexes | Nursing homes | Self-storage facilities, car washes, gas stations, and agricultural facilities |
A key financial benefit is the time value of money: saving on taxes now is more valuable than saving the same amount later.
The immediate cash flow generated can be reinvested into the property, used to pay down debt, or fund new investments!
Key Considerations Before Proceeding
To maximize benefits, plan to hold the property for at least 3-5 years after the study. Shorter holding periods can trigger "depreciation recapture," where some of the accelerated deductions are taxed at a higher rate when the property is sold.
For individual investors, your ability to use losses from the study to offset other income (like W-2 wages) depends on complex IRS rules, such as qualifying as a Real Estate Professional or utilizing the short-term rental "loophole". Consulting with a qualified tax advisor is essential here.
Always work with a reputable firm that employs Certified Cost Segregation Professionals (CCSPs), provides strong audit defense, and has experience with your specific property type.