Articles & Alerts

How Can a Cost Segregation Study under the TCJA Benefit You?

January 15, 2019

Cost Segregation Studies have been around since the Hospital Corp of America case back in 1997. Many developers and property owners have taken advantage of this study to accelerate their tax deductions through depreciation on both their developments and acquisitions.

As a refresher, a Cost Segregation Study, allocates the purchase price or costs to construct a building into various components to separate assets with depreciable lives of 5, 7 or 15 years from the building, which would be depreciated over 27.5 or 39 years.

The Tax Cuts and Jobs Act (TCJA) of 2017 has made Cost Segregation Studies even more valuable than they were before. Under the TCJA, a taxpayer can now take bonus depreciation on “used” assets. Therefore, all assets depreciable over lives less than 20 years qualify for bonus depreciation. In addition for assets placed in service after September 27, 2017, (unless subject to a binding contract dated prior to that date), the bonus depreciation is 100%. Prior to September 27, 2017 bonus depreciation was 50%.

In conclusion, any assets placed in service after September 27, 2017 and as a result of a Cost Segregation Study have a life less than 20 years, can be fully expensed in the year the asset was placed in service or the year the Cost Segregation Study was completed ( if done in a subsequent year).

Anchin has experts in the area of Cost Segregation that can assist you in evaluating your project or acquisition. Please contact us to see how doing a Cost Segregation Study can benefit you.