Cost segregation is a tax-savings strategy that allows companies that have built, bought or remodeled property to increase their cash flow by speeding up depreciation deductions and deferring their income taxes. Because the cost segregation audit requires an engineer-based approach, you will need a specialized company to perform the study.

If your building project qualifies, the tax savings should far outweigh the price of the cost segregation service. Take these steps if you are considering using cost segregation consultants.

1. Find out if you qualify for cost segregation services. Some building projects aren't applicable, so find out before you spend the money.

2. Conduct a cost segregation analysis on your current building project. This will free up your money when you need it.

3. Use a cost segregation study on an older building project. Even if you didn't use the study during building, the IRS will allow you to go back and get some of the tax breaks.

Action Steps
The best contacts and resources to help you get it done

Find out if a cost segregation analysis will benefit your company

Not all building projects qualify for the tax savings from a cost seg study. Before you embark on the lengthy process, make sure that it will be worthwhile.

I recommend: Cost-segregation.com outlines the importance of using cost seg services and what they can do to help your building project. Moss-Adams has a cost segregation calculator that will estimate the benefits of using cost segregation tax accounting on your project.

Hire cost segregation companies for your current building project

While you are still in the planning stages of your construction or renovation project, think hard about using cost segregation services. This is the time?before depreciation starts?when you can benefit the most.

I recommend: Use specialized cost segregation companies like BKD CPAs & Advisors, Cost Recovery Solutions and GMPC to perform a cost segregation analysis on your building project.

Conduct cost segregation studies on your past projects

Even if you didn't perform a cost segregation analysis before your building project, it might not be too late to get some extra savings. The IRS will allow you to look back on the project, perform the analysis and get the tax break.

I recommend: Commercial Property Consultants outlines who can qualify for the chance to performs the analysis after the property has already been built. KBKG and the Cost Segregation Group provide a free analysis and proposal so you can see if your company would be eligible for benefits.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  If your building is more than 20 years old, chances are that cost segregation services won't do you much good because the building has already depreciated too much.
• •  Many companies will provide a free consultation to see if you qualify for cost segregation services.