# Cost Segregation Study Summary
Cost segregation accelerates tax deductions for investment property owners by reclassifying building components into shorter depreciation schedules. Instead of depreciating an entire property over 27.5 years, the strategy separates personal property, land improvements, and building systems that qualify for 5, 7, or 15-year schedules.
The mechanics work like this. A cost segregation study assigns values to specific assets within a property. HVAC systems, flooring, and interior finishes typically depreciate faster than the structure itself. This front-loads deductions in early ownership years, reducing taxable income substantially.
The benefit compounds for investors holding multiple properties. A $1 million commercial building might generate $50,000 to $100,000 in additional first-year deductions through proper cost segregation. Over time, this shields cash flow from taxes.
Cost segregation requires a professional engineering study and IRS compliance. The analysis must withstand scrutiny, so investors work with specialized firms to ensure proper documentation. The upfront cost ranges from $3,000 to $15,000 depending on property complexity.
This strategy works best for new acquisitions or recent purchases. Investors with existing properties can file amended returns within three years to capture missed deductions. The return on investment typically materializes within one tax season.