How does a Project Qualify for Cost Segregation?
Virtually all commercial properties, including apartment buildings and leased facilities may qualify for cost segregation whether they are in design, under construction, newly acquired or owned since 1987. Properties that have received a major renovation/remodel/rehab may also qualify.
In order to qualify for cost segregation, the taxpayer must have a tax liability or be anticipating a tax liability. The taxpayer may also go back in time as far back as 1987 and “catch up” on all missed depreciation via a Change in Accounting Method IRS Form 3115. No tax return amendment is necessary. For property previously placed in service, a one-year section 481(s) adjustment can be claimed.
MACRS depreciation may be applied to all assets that qualify under the IRS Rules and Procedures. In accordance with the Department of Treasury under I.R.C. Sections 1245 and 1250, and recent US Tax court cases, personal property and certain land improvements may be depreciated over significantly less time than nonresidential real property by performing a cost segregation study.