Case Study
Cost segregation study can accelerate depreciation
A manufacturing company spends $5 million to purchase land and a building. A hypothetical example of the potential difference in resulting depreciation “lives” with vs. without a cost segregation study might be the following:
| Category | Depreciation without study | Depreciation with study |
| 5 year: | No depreciation taken | $ 500,000 |
| 7 year: | No depreciation taken | $ 440,000 |
| 15 year: | No depreciation taken | $ 360,000 |
| 39 year: | $ 3,900,000 | $ 2,600,000 |
| Total depreciation | $ 3,900,000 | $ 3,900,000 |
| Land1 | $ 1,100,000 | $ 1,100,000 |
| Total: | $ 5,000,000 | $ 5,000,000 |
The accelerated depreciation provides tax savings now, and can be well worth the cost of performing the study. Every business and every building is different, however, and only a qualified team of professionals can help you evaluate whether your situation is a good candidate for such a study.
1 Nondepreciable