Why Cost Segregation ?
Cost segregation studies offer significant tax savings, especially for businesses, such as manufacturers, with specialized facilities. Consider this example:
Wolverine Widgets, a heavy manufacturing company, acquires an existing plant for $10 million on July 1, 2013. If the company were to allocate the entire purchase price to the building, its depreciation deductions would be roughly $256,000 per year ($177,000 in year 1, under IRS tables). Wolverine obtains a cost segregation study, which concludes that 35 percent of the purchase price is properly allocable to 39-year property, 15 percent to 15-year property, 45 percent to seven-year property, and five percent to five-year property.
In this example, a cost segregation study generated an additional $703,000 in depreciation deductions in the first year alone.