What is a Cost Segregation Study?

Commercial and residential property owners who have recently purchased real estate can use cost segregation to separate out components of the property that depreciate faster than the building as a whole. A cost segregation study can be performed to identify classes of assets within the building. The study will separate out personal property items, such as carpeting, light fixtures, kitchen appliances, landscaping, driveways, sidewalks and decks, into shorter class lives (3, 5, 7, 10 and 15 years). The shorter asset life classes can use accelerated depreciation, which allows for higher depreciation expenses in the first few years and lower expenses later on.