Southern New Jersey Overlook

Taxpayers who have placed real property into service after December 31, 1986 can realize $20,000 to $80,000 in tax benefits per $1,000,000 of a building’s tax basis. They can accomplish this by utilizing shorter recovery periods and accelerated depreciation methods available to them through the application of Cost Segregation techniques.

For instance, identifying 10% of a $1,000,000 building as tangible personal property, as allowed under IRS Code Section 1245, rather than real property (Section 1250), and depreciating over 5 years rather than 39 years, creates $23,000 of tax benefits. Identifying 10% of a $1,000,000 building as Land Improvements rather than real property, therefore depreciating over 15 years rather than 39 years, creates $12,000 of tax benefits. (Source: Marshall-Stevens via Realstratpublications.)

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"Cost segregation is a lucrative tax strategy that should be used in almost every major purchase of commercial real estate."  - Wall Street Journal
 
 
Additional articles and online resources:

Cost Segregation: Why are 90% of Real Estate Investors Overpaying Federal Income Taxes?

AICPA - Cost Segregation Applied - CPA guidelines for how to use, pros/cons and when/when not to use.  "A taxpayer can substantially increase cash flow by segregating property costs...Cost Segregations can provide Real Estate purchasers with tremendous tax benefits from accelerated depreciation deductions and easier write-offs when an asset becomes obsolete, broken or destroyed."

SVA - Getting Facts About Cost Segregation (PDF)

CPA Journal (NYSSCPA) - Real Estate Investors Can Benefit for Cost Segregation Studies

IRS's cost segregation audit guidelines