As 59 percent of our respondents were unaware of these benefits, this seems to be an area where many real estate developers may be missing an opportunity. By employing a cost segregation study, we have seen many of our clients have a greater ability to finance a proposed deal because cost segregation will improve the cash flow projections that they can present to the lending institution.
In brief, cost segregation studies utilize an engineering-based approach to classify components of real property to a lesser depreciation life in order to recognize current, future and permanent tax savings.
The classification of assets placed into service in past years can be corrected without the need to amend the prior year’s tax returns. Also, the total depreciation adjustment identified for all prior years can be fully recognized in the year of change.