Cost Segregation Studies for Manufacturers

Manufacturing facilities represent significant investments. While buildings are typically depreciated over long periods (39 years for non-residential), many components within them qualify for much shorter depreciation lives. A Cost Segregation Study is an engineering-based analysis that identifies and reclassifies building components into shorter recovery periods, accelerating depreciation deductions and significantly boosting your near-term cash flow. Schapira CPA offers expert Cost Segregation Studies specifically tailored for manufacturing properties.

What is a Cost Segregation Study?

This powerful tax strategy involves:

• Detailed Analysis of Property Costs: Breaking down the total cost of constructing, purchasing, or renovating a manufacturing facility into its individual components.
• Asset Classification: Identifying assets typically classified as long-life real property (39-year) that can be reclassified as shorter-lived personal property (e.g., 5, 7, or 15-year) or land improvements (15-year).
• Engineering & Valuation Expertise: Utilizing engineering principles and construction cost estimation techniques to allocate costs accurately to different asset classes.
• Compliance with IRS Guidelines: Ensuring the study adheres to IRS standards and methodologies for defensibility under audit.

Examples of reclassifiable assets in manufacturing facilities often include specialized electrical systems for machinery, process piping, ventilation specific to production areas, certain flooring, site improvements, and decorative elements.

Our Cost Segregation Approach

Schapira CPA partners with qualified engineering professionals to deliver comprehensive and reliable studies:

• Initial Feasibility Assessment: Evaluating your property details (cost, date placed in service) to estimate potential tax savings and determine if a full study is beneficial.
• Site Visits and Documentation Review: Thorough examination of blueprints, construction cost data, and physical inspection of the facility.
• Engineering-Based Analysis: Applying established engineering and cost estimation methods to segregate assets accurately.
• Detailed Reporting: Providing a comprehensive report that documents the methodology, identifies reclassified assets, calculates depreciation schedules, and meets IRS requirements.
• Coordination with Tax Preparation: Seamlessly integrating the study results into your tax returns to claim the accelerated depreciation deductions.

Unlock Significant Tax Savings & Improve Cash Flow

Conducting a Cost Segregation Study offers compelling financial benefits:

• **Accelerated Depreciation:** Significantly increasing depreciation deductions in the early years of property ownership.
• **Reduced Current Tax Liability:** Lowering your immediate income tax payments due to larger deductions.
• **Improved Cash Flow:** Freeing up substantial cash that would otherwise be paid in taxes, available for reinvestment, debt reduction, or operational needs.
• **Potential for Catch-Up Depreciation:** For properties acquired or improved in prior years, a study can allow for "catch-up" depreciation without amending past returns (via Form 3115).
• **Enhanced ROI on Property Investments:** Improving the financial return on your real estate assets through tax optimization.

Is a Cost Segregation Study Right for Your Facility?

Cost Segregation Studies are typically most beneficial for manufacturers who have constructed, purchased, or significantly renovated facilities with costs exceeding $500,000 - $1,000,000, though benefits can exist at lower thresholds. If you own manufacturing real estate, exploring this strategy is highly recommended.