A Cost Segregation Study (CSS) is a proactive tax strategy for companies and individuals who have constructed, acquired, or renovated commercial properties. This tool accelerates depreciation, thereby improving cash flow and postponing federal and state income taxes. The main goal of a CSS is to identify assets and project-related costs that can be reclassified into shorter depreciation life classes than those they are currently under. Ordinarily, these components fall under a 39-year life class (27.5 years for residential properties), which means they are depreciated over these periods using a straight-line depreciation method. However, a CSS typically segregates and reclassifies 20% to 40% of the total project cost into depreciation life classes of 5, 7, and 15 years. This significant reclassification can result in substantial tax savings. A cost segregation study must be performed by a qualified engineer experienced in cost segregation. The engineer will conduct a thorough inspection of the property, quantify and estimate the value of each component, and assign the appropriate class lives per IRS regulations. The final report, which your CPA will use to file tax returns, includes detailed calculations, methodology, relevant case law data, definitions, and photo documentation.