Uncork Bottled Cash Flow with Cost Segregation Studies – Rea CPA

Uncork Bottled Cash Flow with Cost Segregation Studies

Although many articles have been written about cost segregation studies, most emphasize the mechanics of the process. Cost segregation studies identify and allocate material components of a building including substantial improvements eligible for faster depreciation recovery periods. The additional tax deduction created by the accelerated depreciation reduces the income tax that would have been due without the cost segregation study. Ultimately, this process can create substantial additional cash flow even after the discounted net present value of the savings is taken into consideration.

The following are actual results of randomly selected cost segregation studies completed for our clients:


Property Cost First Year Tax Savings Total NPV Tax Savings
Study A $1,425,000 $29,000 $26,000
Study B $3,400,000 $91,000 $118,000


The actual cash flow created by the cost segregation study varies depending on several factors. However, the study can release potential cash flow that would not be available otherwise. Please contact your Rea advisor to discuss how much potential cash flow you could unleash.

This article was originally published in Illuminations: Facts & Figures from people with a brighter way, a Rea & Associates enewsletter, 6/20/2007.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.