Unlock Tax Savings with a Cost Segregation Study
- Jun 12
- 2 min read
If your business owns commercial real estate, a cost segregation study could help reduce taxes and improve cash flow. This approach to tax planning singles out parts of a building that qualify for faster depreciation than the structure overall, enabling you to claim deductions sooner and postpone paying taxes.
Why It Matters
Most commercial buildings are depreciated over 39 years. However, many components within those buildings have much shorter recovery periods, including:
HVAC, plumbing, and electrical systems
Security and fire protection systems
Flooring, cabinetry, and fixtures
Doors, drywall, and communication wiring
Businesses can depreciate these assets over five, seven, or 15 years rather than 39, allowing for larger, faster deductions and better short-term cash flow.
The Expanded Benefits
Recent tax law changes have made cost segregation more favorable.
100% Bonus Depreciation
The 100% bonus depreciation has been restored for eligible assets acquired and placed in service after January 19, 2025. While buildings themselves do not qualify, many components identified through a cost segregation study may be fully deductible in the first year.
Higher Section 179 Limits
The law also increased Section 179 expensing limits. For 2026, businesses can immediately deduct up to $2.56M of qualifying assets, with a phaseout beginning at $4.09M. Again, certain building components may qualify even though the building itself does not.
Special Consideration for Manufacturers
A new deduction for Qualified Production Property (QPP) lets certain manufacturing and agricultural businesses immediately write off the cost of some production facilities. Since this deduction covers assets that would normally be depreciated over 39 years, cost segregation studies may offer fewer advantages for properties that qualify.
Professional Guidance Is Essential
Cost segregation studies can produce significant tax savings, but they require specialized analysis and documentation. Because the IRS closely reviews these deductions, it's important to work with experienced professionals who can properly identify qualifying assets and support the study's findings.
If your business owns commercial real estate, contact us to determine whether a cost segregation study could help lower your tax burden and improve cash flow. Make sure to give yourself plenty of time to plan and make adjustments before the end of the year.
