Cost Segregation Studies (IRC §§167 & 168)

What Is Cost Segregation?

Cost segregation is an engineering-based tax analysis that identifies building components eligible for accelerated depreciation under IRC §§167 and 168. When properly executed, it allows commercial property owners to reclassify qualifying assets into shorter MACRS recovery periods.

CSS Resources performs IRS-defensible cost segregation studies grounded in engineering methodology, construction documentation, and applicable case law.

Our Cost Segregation Methodology

Our cost segregation studies follow IRS-accepted methodologies and prevailing industry standards, including principles established in Hospital Corporation of America and subsequent guidance.

Each study includes:

• Identification of assets eligible for 5-, 7-, and 15-year recovery periods

• Proper separation of:

  • Land

  • Land improvements

  • Building components

• Application of MACRS depreciation rules under IRC §168

• Engineering-based reasoning tied to construction methods and functional use

• Conservative classification supported by documentation, not assumptions

We do not rely on rule-of-thumb allocations or unsupported estimates.

Cost Segregation Feasibility Assessment

Not every property benefits from cost segregation. Before recommending a full study, we perform a cost segregation feasibility analysis evaluating:

• Property type and use

• Placed-in-service date

• Depreciable basis

• Ownership horizon

• Audit sensitivity

This ensures economic justification and defensibility.

Who Benefits From Cost Segregation?

Cost segregation is typically most effective for:

• Commercial and industrial property owners

• Newly constructed, acquired, or renovated properties

• Properties with significant depreciable basis

• Owners expecting to hold the property long enough to realize depreciation benefits

We always perform a feasibility review before recommending a full study.

Deliverables & Audit Readiness

A typical deliverable includes:

• Executive summary of findings

• Detailed asset classification tables

• Explanation of recovery period assignments

• Identification of assumptions and limitations

• Audit-ready documentation suitable for CPA review and IRS examination

Our reports are designed to integrate cleanly into tax filings.

We explicitly identify:

• Areas of higher audit sensitivity

• Aggressive classifications that were rejected

• Assumptions made due to incomplete data

• Items retained as 39-year property for conservatism

Our goal is not maximum reclassification at all costs, but sustainable acceleration that survives scrutiny.