11th Mar 2011
Cost segregation is a technique to depreciate assets that separates real estate into personal property, such as machinery or equipment, land improvements, buildings on the land, and the land itself. Personal property and land improvements are then depreciated at an accelerated rate in order to reduce the building owner’s tax obligations. If your business is considering a building purchase or a building improvement, your accountant might suggest using this technique.
Personal property and land improvements are items that are useful for a relatively short period of time, like a fence, a piece of furniture, or a piece of machinery. Because these items aren’t useful for as long as a piece of land or a building, they can be depreciated more quickly.
If you’re advised to have a cost segregation conducted, be sure to hire a certified appraiser trained to perform a site inspection and determine the value of any machinery or equipment eligible to fall under the personal property category of cost segregation.
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By: Marketing & Consultant Services, Inc.