Cost segregation
A tax study that breaks a property into components with shorter depreciation lives, accelerating deductions. Common on larger investment properties. Pays for itself only on bigger deals.
Every term like this one lights up in the step you're on.
Free to set up. No credit card.Part 1 of 4
Why a seller cares
A cost segregation study speeds up depreciation on a larger rental by splitting it into parts with shorter lives. It matters at sale because every dollar accelerated is recaptured then, at up to 25%.
Part 2 of 4
A simple example
A study on your $600,000 apartment building moved $120,000 into five- and fifteen-year property. At sale, that depreciation is recaptured.
| The effect | When |
|---|---|
| Bigger deductions | In the early years of ownership |
| A lower adjusted basis | Every year after |
| More recapture | At the sale, unless it is exchanged |
Cost segregation is depreciation brought forward, and the sale is where it is settled.
Part 3 of 4
What people get wrong
That it creates deductions. It moves them earlier; the total over the life of the building is the same.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
One piece of your sale. Here is where all the pieces live.
In your room, this word explains itself where it appears.
Keighbor keeps your whole home sale in one place and defines every term like this one right where you meet it, in the step you're on. Free to set up, with or without an agent.