While the most common reason for performing a cost segregation study is to minimize the current year tax liability through the acceleration of depreciation deductions, a study can result in additional benefits. Listed below are some of the more common benefits that may be realized through a PCS cost segregation study.
The financial benefits realized through the implementation of a cost segregation study may vary greatly depending on several factors, such as the facility type, bonus eligibility, and years considered in the analysis.
Facilities which house process-intensive activities, such as manufacturing buildings, allow for a greater percentage of electrical and mechanical costs to be allocated to personal property (generally depreciable over 5 or 7 years).
Facilities with more finishes, higher quality finishes or more specialty items, such as banks, will also have a higher percentage reclassified to shorter life property.
Facilities located within city limits may have a lower percentage reclassified to shorter-life property since most properties will have limited or no parking areas, which generally comprise the bulk of 15-year land improvements.
Shown below are typical results for various property types and sample case studies.