An Explanation
About Cost Segregation
Introduction
Cost segregation is a tax strategy that increases cash flow for taxpayers who've purchased, constructed, or renovated real estate. It accelerates the depreciation they can deduct in the early years of ownership, lowering tax liability and creating time-value-of-money savings over the life of the property. Firestone identifies, calculates, and documents that accelerated depreciation so you keep more cash working in your business sooner.
How Does Cost Segregation Work?
Real estate is generally depreciated over 39 years (commercial) or 27.5 years (residential). A cost segregation study identifies building components that can be reclassified into shorter depreciation schedules — typically accelerating 20–35% of a building's total value. Studies can be performed on properties just purchased or constructed, as well as ones acquired or built years ago.
Who Benefits?
Commercial buildings
Manufacturing facilities
Office buildings
Apartments
Restaurants
Industrial properties
For a cost segregation study to make sense, a taxpayer generally should:
Spend approximately $1M or more on the real estate asset
Be profitable and owe income tax
Expect to hold the asset for at least 3 years
Potential Benefits
Accelerated depreciation
Improved cash flow
Better tax planning
How Firestone Helps
The process begins with a free estimate — Firestone gathers preliminary information about the building and the taxpayer's tax circumstances, then provides a proposal that includes an estimated financial savings and a fee quote for the study. Once formally engaged, Firestone requests detailed building information, often schedules a site visit, performs the analysis, and delivers the final report and tax schedules.
View the full step-by-step process →
Why Firestone Tax?
Tax expertise in cost segregation and R&D studies
Collaboration with your CPA rather than working around them
Technical, engineering-based analysis behind every study
Full documentation support, ready if your study is ever reviewed
Working with your CPA
Cost segregation studies require specialized technical analysis most CPA firms don't perform in-house. Firestone partners with CPAs to deliver that analysis and documentation, so you can offer the benefit to clients who own real estate without taking on the study yourself.
Zach Boyd, CPA and founder of Boyd CPA, has partnered with Firestone since 2017. When one of his commercial real estate clients needed a cost segregation study, Zach brought us in. The study produced a $280,000 deduction and an estimated $60,000 in tax savings.
"Partnering with Firestone is one of the best ways to offer more strategic value to clients," Zach says. "Rance has never once tried to pull a client away from my practice."
Partnering with Firestone means you can:
Offer specialized cost segregation and R&D tax credit services without building that expertise in-house
Avoid losing real estate clients to larger firms
Deepen your value to clients without adding to your workload
Focus on tax prep while Firestone handles the technical study
Learn About Our CPA Partnership Program →
FAQ
What properties qualify?
Most commercial and income-producing residential real estate — see "Who Benefits" above.
How much does a study cost?
Firestone provides a fee quote as part of the free initial proposal, based on the specific property.
Is a cost segregation study required?
No. It's optional, but it can meaningfully accelerate deductions for eligible property owners.
Can older properties qualify?
Yes. Studies can be performed on properties purchased or built years in the past, not just new acquisitions.
How does bonus depreciation affect cost segregation?
Bonus depreciation allows a larger share of the accelerated components to be deducted immediately, making cost segregation even more valuable in years when bonus depreciation is available.