Cost Segregation Studies offer the opportunity to increase post-tax cash flows from an investment property by accelerating depreciation expense and deferring income taxes. To accomplish this, a team of experts in construction, engineering and accounting reallocate portions of a property’s cost basis from real property (long term depreciation life) to personal property or site improvements (short term depreciation life).

The benefits of a Cost Seg Study still apply for single tenant net lease (STNL) properties: STNL properties are normally easier to assess, meaning a Cost Seg can be commissioned for much less than for a more complex property. On a relative basis, the present value tax savings can be just as great for a STNL property of a few million dollars or less as for a larger asset.

Certain properties will allow for reallocation of greater amounts of value to short term depreciation lives than others. A qualified Cost Seg team can provide a good estimate of a property’s potential savings to an owner before a decision is made to move forward with the study.

THE BOTTOM LINE: Cost Segregation offers a way for real estate investors to realize tens of thousands of dollars in present value tax savings. STNL owners should understand that even at a smaller price point, they can still benefit from a reduced tax bill and increased up-front cash flows to their property.

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