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Cost Segregation

Effective, Professional Cost Segregation Studies for New Jersey Businesses

A cost segregation study from Wiss can help New York and New Jersey companies increase their cash flow by accelerating their return on investment on newly constructed, acquired, or renovated properties.

What Are Cost Segregation Studies?

A cost segregation study is a federal income tax tool that increases your near term cash flow, in the form of a deferral, by utilizing shorter recovery periods to accelerate the return on capital from your investment in property. Whether newly constructed, purchased, or renovated, the components of your building may be properly classified, through a cost segregation study, into shorter recovery periods for computing depreciation deductions. The study properly carves out certain qualifying portions of your building, which would normally be buried in 39- or 27.5-year categories, into five, seven, and 15-year lives.

Who Can Benefit From a Cost Segregation Study?

Your business could benefit from a cost segregation study if:

  • You own commercial real estate in excess of $1 million, if it was newly constructed, purchased, or remodeled within the last five years.
  • You intend on holding the property for the next several years.
  • You are a tax paying entity and in a tax bracket for which a tax deferral is beneficial.

Businesses in a wide range of industries are often able to benefit from a cost segregation study, including apartments, auto dealerships, banks, casinos, distribution centers and warehouses, grocery stores, healthcare facilities, hotels, manufacturing facilities, nursing homes, office buildings, shopping centers, sports facilities, and restaurants. Typically, more complex buildings will generate the greatest benefit from a cost segregation study.

What Sort of Tax Benefit Might I Expect from a Cost Segregation Study?

Each building is necessarily different, although the benefits of a study are largely dictated by the type of property and, since this is a tax deferral strategy, the length of time that you hold onto the property. If you hold onto your property for a full 39 years, the benefit is approximately $.19 for every dollar reclassified from 39 years to five years. Using the half-year convention, this assumes a 35 percent federal tax rate and an eight percent discount rate.

For every $1 million of property reclassified from 39 years, the cumulative present value of tax deferral equals approximately:

  • $195,000 for 5-Year Property
  • $178,000 for 7-Year Property
  • $108,000 for 15-Year Property

How can our Cost Segregation team help you today?

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