AE Tax Advisors

I bought a commercial office building for $1.2 million and my accountant was depreciating it over 39 years at a flat rate. When I asked about cost segregation, he dismissed it as something only large corporations do. That dismissal cost me nearly $90,000.

AE Tax Advisors performed a comprehensive cost segregation study on the building. Their engineering team identified and reclassified over 30 percent of the building's cost into shorter-life asset categories. Carpeting, ceiling tiles, decorative fixtures, electrical outlets serving equipment, parking lot, landscaping, signage, security systems, and specialized HVAC components were all moved from 39-year property to 5, 7, and 15-year categories.

With bonus depreciation, the reclassified components generated accelerated deductions in year one. The tax impact was immediate and significant -- $89,000 in savings on my current year return.

The study itself was impressive. The report was over 50 pages with detailed component breakdowns, photographs, cost allocations, and legal citations supporting every reclassification. AE Tax explained that a well-documented cost seg study is one of the strongest positions you can have because the IRS has its own Cost Segregation Audit Techniques Guide that supports the methodology.

My old accountant's claim that cost seg is "only for large corporations" was simply wrong. The IRS has no minimum property value requirement, and properties in the $500,000 to $2,000,000 range often see the highest return on the study investment.

If your CPA is using straight-line depreciation on commercial property, call AE Tax Advisors. The savings are real, the strategy is well-established, and the study will pay for itself many times over.