cost segregation, cost segregation and depreciationLet me first define what cost segregation is before getting into the specifics of the process. Cost segregation is a process in which construction or acquisition costs are broken down into specific categories with the hope of finding the maximum accelerated depreciation schedule. Remember that the quicker something depreciates the larger the tax cuts associated. Saving money is not the only benefit of the cost segregation process; they are a great source of information to place within property records.

Cost segregation also helps in figuring out what construction costs shouldn’t be considered part of property taxes such as overtime. Cost segregation and depreciation should be done by a professional unless you can find legitimate information that teaches how the steps work. The best time to start categorizing and beginning the cost segregation process is when plans to remodel or build are drawn up. Beginning earlier then later will make managing all of the cost allocations much easier.

When drawing up construction plans begin to place costs in categories. Make sure to break these categories into the base cost for say demolition and then another for the additional fees associated.