Under the IRS tax laws, cost segregation is a method for depreciating real property faster, thus creating tax savings for the property owner. In other words, a cost segregation study will identify aspects of a property that can be depreciated over a shorter period of time (5, 7 and 15 years) than the building itself (typically 39 years). Bigger picture, cost segregation is a vehicle to reduce your tax liability and increase cash flow.
A cost segregation study is most efficient for new buildings recently constructed, but it can also uncover retroactive tax deductions for older buildings. About the only downside to cost segregation is the cost required to perform cost segregation study by a trained cost segregation engineer. Yes, it will cost you money to save more in taxes.
To learn about the latest changes in cost segregation, the Dental Accounting Association recently held a webinar provided by Bedford Cost Segregation. Bedford is one of the largest providers of cost segregation studies and has many ASCSP professionals on staff located throughout the United States.
With the most recent Tax Cuts and Jobs Act, there are many changes in play with cost segregation, misconceptions, and areas that still need refinement.
Overall, cost segregation remains as an effective and viable method for lowering your effective tax rate for 2018 and beyond. Yes, even dentists with relatively small office buildings can take advantage of these tax savings.
If you would like to capitalize on cost segregation to lower your effective tax rate, simply contact a Dental Accounting Association member near you.