What is the Best Size Property to do a Cost Segregation Study on? If you're wondering if your investment is the right size for a Cost Segregation Study, cost segregation generally works best for properties with a value of $500,000 or more. The decision depends on maximizing the return on investment (ROI) from the study itself. While it can sometimes make financial sense for smaller properties, the value of the property is directly correlated to the potential tax savings.
The reason for this guideline is simple: the larger the property value, the more assets and components can be identified and reclassified for accelerated depreciation. This reclassification leads to significantly bigger tax savings, making the cost of the study worthwhile. If you are unsure whether your property's size qualifies or if a study is worth pursuing for your specific situation, an initial analysis can be performed to give you a clear answer.
Cost Segregation: Optimal Property Size
- Best Fit: Cost segregation works best for properties with a value of $500,000 or so.
- Smaller Properties: Sometimes the study can make sense for smaller properties, depending on the specific situation.
- Rationale: The larger the property value, the more items can be reclassified for faster depreciation.
- Result: Reclassification on larger properties leads to bigger tax savings.
- Actionable Next Step: If you are unsure if your property qualifies, we can do an initial analysis to see if it's worth pursuing.
