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Cost Segregation and Certified Machinery and Equipment Appraisals (CMEAs)

December 2, 2010

Cost segregation is a strategic tax savings’ technique for businesses. Conducting a segregation study, can enable companies that have constructed, purchased, expanded, or remodeled real estate to increase their cash flow by accelerating depreciation deductions and deferring their federal and state income taxes.

This technique separates and reclassifies project-related costs that were classified as real estate costs into personal property, land improvements, buildings, and land, and then depreciates personal property and land improvements at an accelerated rate. It offers shorter depreciable tax lives for federal and state income tax purposes.

Personal property includes things like furniture, window treatments, and some fixtures. Land improvements include things like sidewalks and fences. Because these items are useful for a relatively short period of time, they can be depreciated more quickly than buildings or land. The buildings category includes each of the building’s separate components, like the roof or the walls; these can be depreciated at different rates.

An important component of conducting a cost segregation study is to hire a certified machinery and equipment appraiser who can conduct a site inspection and substantiate the value of any equipment or machinery on the property that would fall under the personal property or buildings categories of the cost segregation.

The NEBB Institute endorses and strives to observe the highest standards of professional ethics to preserve the public trust inherent in the professional appraisal practice. The Institute provides initial and monthly comprehensive education, ongoing support, and a dynamic international network, and certifies professionals in the art of machinery/equipment appraisal and brokerage.

By: NEBB Institute



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