Property depreciation is an important part of real estate ownership, but many owners initially treat a building as one single asset for depreciation purposes. What is cost segregation? In simple terms, cost segregation is an approach that examines the different components within a building and places qualifying assets into appropriate depreciation categories. This can provide a clearer picture of how different parts of a property may be depreciated.
A typical building can contain much more than walls, floors, and a roof. Depending on the property, there may be electrical components, plumbing, flooring, lighting, equipment, exterior improvements, and other assets. Some of these components may have depreciation periods that differ from the primary building structure. A cost segregation analysis examines these components and identifies their appropriate classifications based on available property information.
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