In addition, some components of a building are attributable to both real property and personal property. For example, certain portions of the wiring and plumbing in a building are properly attributable to the general operation and function of a building. Simultaneously, other portions of wiring and plumbing perform functions specifically allocable to a particular piece of equipment and machinery. The economic benefit derived from cost segregation studies often can be significant. The following chart illustrates potential savings for a moderately specialized industrial building.
Actual results differ with the type of property.
Building owners should view the potential savings on a continuum, with high-tech manufacturing facilities realizing the largest tax savings and a simple warehouse reaping lesser amounts. There is also the tax benefit of requiring less interest to be capitalized during the construction period as a result of the cost segregation study. Preparing a cost segregation report requires a thorough knowledge and understanding of case law, regulations and the IRS code. Therefore, it is important to enlist the help of an experienced cost segregation team. A typical cost segregation team includes individuals with experience in federal and multi-state tax, legal, engineering and construction.