What is the impact of a cost segregation study if I sell my property?
The good news is it’s not as bad as some people may think. Regardless of whether you’ve had a cost segregation study performed or not, when you sell a property you will recognize either a gain or a loss. When you sell for a gain you pay taxes on that gain. The amount of tax is based on the capital gains rate for real property (§1250) and the taxpayer’s ordinary income rate for personal property (§ 1245). When a cost segregation study is performed, items that would normally be considered real property are instead allocated to personal property. The ordinary income rate can be higher or lower than the capital gain rate, depending on the situation. If higher, the amount of tax due upon a sale would most likely be more if a cost segregation study were performed. However, the financial impact of the cost segregation study will often outweigh the adverse effect of the ordinary income rate. The bottom line is that this is truly a “facts and circumstances” situation and will require some addit
