A cost segregation study separates the personal and real property costs of a building into their respective class lives to establish depreciation schedules for income tax purposes. The study may also be used for determining insurance requirements or to validate (or invalidate) property tax assessments.

Being able to allocate a shorter "time of use" to an item will provide larger depreciation amounts sooner, and thus more deductions for income tax purposes. It is to be noted that taking a larger depreciation sooner means that the deductions will be used up sooner. The advantage is that there is earlier use of the money from tax savings.

Check with your accountant to see if a cost segregation study will benefit you. Please note that the conclusions of a cost segregation study cannot be relied on to avoid IRS penalties.

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