Cost segregation is best performed prior to the filing of the initial depreciation schedule on an asset. This is immediately after the purchase of a newly acquired building, or once a construction project is completed and placed in service. While tax savings vary, the positive benefits of a Cost Segregation study can be quite significant based on calculations involving the individual's overall tax situation and the specific assets in any given property. Their identifying and reclassifying eligible assets to shorter recovery periods is the key to the lowering of tax liability from the resulting accelerated depreciation on those assets.

Recent tax law changes under the Tax Cuts and

Jobs Act of 2017 (TCJA) have given an additional

boost to cost segregation.

Bonus depreciation (the federal tax incentive that allows a business to immediately deduct a large percentage of the purchase price of eligible assets) was increased from 50% to 100%, essentially allowing real estate investors to immediately expense anything less than 20 year property. However, missed depreciation for past purchases, construction, expansions, and renovations can be recouped later via a cost segregation study. In such cases, there is no need to amend already filed tax returns. “Catch–up” depreciation can be taken in one year by filing Form 3115 (Change in Accounting Method).