What are qualifying costs?
Are there any additional tax benefits?
Beyond accelerating depreciation deductions, a cost segregation may also help you capture additional tax savings, such as:
• State and local property tax reduction. Cost segregation may result in the reduction of state and local real property taxes by reducing building costs allocable to real property. Plus, several states provide sales and use tax exemptions for tangible personal property used in a manufacturing process or for research and development. A cost segregation study will identify such qualifying personal property, but the tax savings will depend on whether the property is classified as real or personal property, based on applicable state laws.
• Energy efficient commercial building property tax incentives. Cost segregation studies may help identify prior and current expenditures related to heating and cooling systems, ventilation, hot water systems, interior lighting systems and the building envelope that qualify for energy tax incentives, such as the 45L credit, Section 179D deduction and more.
Ready to get started?
What are qualifying costs?
Qualifying costs generally include: Building Components
• Lighting
• Security and fire protection systems
• Removable partitions
• Removable carpeting and wall tiling
• Furniture
• Counters
• Appliances
• Machinery( including machinery foundations) unrelated to the operation and maintenance of the building
• The portion of electrical wiring and plumbing properly allocable to machinery and equipment that is unrelated to the operation and maintenance of the building
Land Improvements
Navigating through a cost segregation study is no easy feat. It requires thorough examination of each property, and pros who understand the nuances of qualifying building components. Our team of cost segregation specialists are to here help guide you through this complex process to ensure you reap the benefits of improved cash flow and reduced taxes
• Landscaping
• Fences
• Sidewalks
• Curbs
• Parking lots
• Utilities
• Signs
• Swimming pools
• Tennis courts
• Playgrounds
About the Author
JAMES O’ RILLEY, CPA
PRINCIPAL, DOEREN MAYHEW ASSURANCE PRINCIPAL, DOEREN MAYHEW ADVISORS, LLC orilley @ doeren. com
Jim brings over 35 years of experience to his role as the firm’ s National Practice Leader of the Tax Group, guiding domestic businesses and high-net-worth clients in an evolving tax and business landscape.
• Lighting
Qualified improvement property placed into service can also be depreciated with a 15-year recovery period. The requirements for qualified improvement property placed in service after 2017 must meet both criteria:
• The property must be an improvement to an interior portion of a building that is nonresidential real property.
• The improvement must be placed in service after the date the building was first placed in service by any taxpayer.
VIEWPOINTS: ISSUE 1 2025 | 09