When a commercial property is purchased or improved, depreciation may deserve more detailed attention than a single building classification provides. Different components can have different recovery periods, and a cost segregation study examines those components to identify appropriate asset groups. This approach gives owners and tax professionals more detailed information for federal income tax planning.
The Cost Segregation IRS resource explains that property can include numerous asset types with different recovery periods and placed-in-service dates. A study separates applicable components into groups with similar recovery periods so depreciation can be calculated using the appropriate treatment. The process is property-specific and depends on the facts available for the building.
For anyone searching for a cost segregation study IRS resource, the IRS Audit Techniques Guide offers useful technical context. https://www.costsegregationirs.com/
