Asset Classifications for Cost Segregation

[Julio Gonzalez]

Cost segregation utilizes the MACRS approach. The key is to identify personal property from real property. Tangible personal property identified in a cost segregation study is what allows you to accelerate depreciation. This includes structural components of the building. Non-tangible property includes buildings, land or other inherently permanent structures.

I get a lot of questions on which group specific assets belong in, so I put together a list to help.

Non-Tangible Property

• Building (27.5 or 39 Year Useful Life)
• Land (Non-Depreciable)
• Paved Parking Areas (15 Year useful life)
• Swimming Pools (15 Year useful life)
• Fences (15 year useful life)
• Bridges (15 year useful life)
• Exterior Landscaping (15 year useful life)
• Docks (15 year useful life)
• Sidewalks (15 year useful life)

Tangible Personal Property

• Millwork or decorative trim
• Carpet
• Air Conditioning equipment
• Shelving, cabinets and display racks
• Accordion doors and partitions
• Wall coverings
• Interior landscaping
• Neon or other signs
• Decorative and business specific activity light fixtures
• Generators, machinery and kitchen equipment
• Window treatments

What other questions do you have regarding cost segregation?

[Michael Plaks]

Let's clarify the air-conditioning equipment. Window AC units can indeed be treated as tangible personal property with a 5-yr life and be bonus-depreciated or deducted under Section 179. 

However, components of a central HVAC system in a residential building, including furnaces and condensers, are NOT eligible for this treatment and must be slowly depreciated over 27.5 years (39 years for STRs). This applies both to single-family residences and multi-family buildings.

Non-residential HVAC systems, such as those in office buildings, warehouses and shopping centers are eligible for bonus depreciation.